Adobe After Effects CS3 uses the algorithm or something very very similar in it's Puppet tool. I used it quite extensively last summer doing this animation for the Heinz "Top This" commercial competition.

http://www.youtube.com/watch?v=2DJQ9PuT4I8

We didn't win, but my wife (the director) did get a personalized bottle of ketchup out of the deal.

If you want to see more of the Puppet tool, there's a tutorial here: http://www.metacafe.com/watch/885847/puppet_tool_in_adobe_af...

Video of puppet tool in use start around minute 2:45