Parallax turns a selected element into a ‘window’, or viewport, and all its children into absolutely positioned layers that can be seen through the viewport. These layers move in response to the mouse, and, depending on their dimensions (and options for layer initialisation), they move by different amounts, in a parallaxy kind of way.
jParallax includes several options for controlling the effect including setting the animation timing and layer positioning control. The demos can be viewed here.
We also covered Brett Taylor’s implementation of a parallax effect last year where he showed how to build parallax backgrounds.
Update: I’ve added straight links to the demos