I read about this on a blog last week and she called it crafted applique. There is a book out on the subject called crafted applique - new possibilities that gives you detailed instructions. If you really want to try this and do it right you might want to buy the book. I'm the type that likes to dive in and experiment so that's what I did.
So back to the drawing board, this time laying the fabric on plastic.
All in all I like this technique especially for small bits. I will continue using my beloved fusible and freezer paper but will definately include the crafted applique technique into my "box of tricks"