This effect pixelates the image. A pixelated video is having blocks on the frame image to give it a mosaic effect. The effect allows adjusting settings so it is possible to make images look interesting in a video.
It is possible to adjust the following settings for this effect:
Applied horizontal pixelation only. You can notice that image looks less pixelized vertically in time lapse software preview window.
Note: this effect is available in the free version of Time-Lapse Tool.