They call it "Photo Fuse".
A new feature in their Micro$oft Live Photo Gallery software, which helps you create the best picture out of a collection of missed shots. Group pictures, for example, where one looks fantastic and somebody else just looks like he wants to eat somebody else. Or perhaps is making donkey ears above somebody else.
Simply select a bunch of photos which show the same group of people, animals, things click a button, select the parts you want to replace and choose the footage you want to replace it with. It's that simple.
Techcrunch has a video: techcrunch.com/(..)/sentials-suite/
Of course, the problem is that it's Windows software. It won't be much use to me as Ubuntu-adopt.
I'm quite sure it won't be long before Google adds something like that to their Picasa. In the end, they've had face recognition in it for quite a while.