Of course, being a parallax effect it doesn't look much in a still image, but basically Tails is frolicing between four different layers of sprites, each at a slightly different depth.
The only 'trick' behind it is a projection matrix which just happens to be a 1:1 ortho arrangement when depth=0. Anything drawn at depth 0 is an unscaled sprite, whereas other values grow or shrink them accordingly. Then it's just a case of creating some sprites which have plenty of gaps so you can see one through the other. The idea is that it's a big clump of bushy purple grass ontop of some kind of green platform.
It seems to work quite well - I'm worried that it'll make the actual sprites (like Tails in this example) look too flat if they're within a semi-3d world, but I think as long as the parallax is kept small and subtle it'll be fine.
Even if I don't use the actual effect, having lots of layers and letting the characters run through tall grass (rather than just ontop, which is what it looks like if you've just got one layer) gives things a wonderfully softened feel and brings the environment alive somewhat.