when you cover a cake in one color fondant and then a second layer of a different color and then do cut outs on the top layer so that the first layer is visible.

If you can post a picture of what you think I'm talking about you are awesome!

I'm not sure what it's called either but I remember seeing a cake like that on Ace of Cakes...I think I've found a pic:

http://www.dallasnews.com/sharedcontent/dws/img/v3/01-09-2008.nf_09ace.GP22AGDEJ.1.jpg

(the brown cake on the right)

http://www.flickr.com/photos/rouvelee/3979297945/

wish I could help more,but here is a pic.

If the fashion world it is called "cut work", I guess because you are cutting away the outer layer to show the inside. Not sure about the cake world.

I guess the name would be "cut-outs" as you implied in your post.

does anyone know how to do it?

ttehan4 explains it in her post.

Thats exactly what I was talking about. Thanks. That birthday cake is adorable! Cut outs sounds like a good technical name to me...lol!