I first heard this called "vowel decimation" which IMO sounds better :) but I've only seen it called this in one product: Zoom Player[1]. It is used to shorten the length of media file tags (song titles etc) to fit available UI space while keeping them readable. It is very effective and I haven't seen any other media player use this.

[1] http://www.inmatrix.com/zplayer/options_interfacedisplay.sht...