It is called Image Menu and uses Moo Tools. I found this example on AjaxRain.com which is a vault for Ajax, Javascript and DHTML examples. The demo is located at PhatFusion.net and it also lists the features, usages and options.

After I downloaded the Javascript and CSS I changed the menu of my own site. With the new funky looking menu, I’ve decided to change the whole theme of the site and now it looks like this. I am not sure how long this will last, as I’ve tried many funky stuff before but eventually I turn back to my old and simple looking site. Try it yourself and have fun.