A feature of digital cameras and digital camcorders that tries to reproduce the effect of a zoom lens electronically.
In some conditions this yelds good results, but in most cases it produces a blotchy pixelated image.
For example, if you are using a digital camera with a 2048 x 1536 CCD, you can use only the central 640 x 480 portion and get something like a 10x digital zoom. But of course, then you are left with a 640 x 480 image; you can either live with it, or digitally interpolate the picture to a higher resolution - and this is when the blotchyness appears.