Miniatures: A technique in which replicas of a scene or objects are recreated at a smaller scale to allow easier manipulation, reduce costs of a set, or create a fantastical environment. Miniatures allow a director to capture great detail, and allows great flexibility in changing the look of a scene.

In the beginning...

Miniatures were widely used for scenes which included non-existent cities and environments. Trip to the Moon, by Georges Melies, was the first film to use miniature models. Half of the short included scenes from the moon and in a space ship, which were created as miniature models and placed in the scene on a set. This allowed Melies to tell a story about going to the moon without having to actually fly to the moon.

Present Day...

Miniatures are still used even to this day. Lord of the Rings, directed by Peter Jackson, involved many miniature models of buildings and cities, allowing more flexibility with the camera and effects.

Recent miniatures are usually shot with a digital background, allowing compositors to insert matte paintings in the background to complete the scene. Miniatures are usually only certain elements of a scene, and not the whole scene.

References: Nova Online