Can anyone tell me how this is done?
Take a look at this link...
JibJab allows you to upload a photo of yourself, so you can star in a comedy music video.

I understand the photo upload bit, but what I dont understand is how there able to take that image from flash and some how dynamically insert it into a flv?... but not just that, but also attach it to some sort of skeleton so that it moves in the flv.

Any ideas?