I've been meaning to implement this idea for ages, it's a GPU implementation of 2D metaballs. It's very simple, very fast and doesn't even require hardware shader support. Seems like the kind of effect that could be useful in some little game..
It's quite fun to play with (use left drag to rotate the emitter), so I might try and fancy it up with some better graphics and collision.
The demo is below, I'll probably release source at some stage but at the moment it's all tied up in my dev framework which needs to be cleaned up (the exe is also larger than it should be as I have all sorts of crap linked in).
The simulation is just done using my simple particle system but it would be fun to implement smoothed particle hydrodynamics..