Perfect Fake Webcam lets you add effects or replace your webcam image. When you launch the application, you will see your webcam's video on a window, and to the right, another window with lots of different effects that you can apply to it. They are sorted into different categories, like Frame, Distort, Filter, Scene, PiP, Text, Flash, Emotion, Mask, Background, Animation and Paint. When you click on one of the effects, it is added to the video feed in real-time. However, I felt that after adding certain effects, there was a bit of a delay. Whenever I moved, the video took a few seconds to show movement.
Another thing Perfect Fake Webcam allows you to do, and I think this is its main purpose, is to let you add a video or image file and play that instead of your web camera. You can then use this video or image file AS your web camera in any application. For example, you can record a video of yourself and loop it and then play that file and video chat with someone on AIM, and they will see your looped video. That is just a silly example, but there are many uses for fake cameras. Perfect Fake Webcam can open many different video files, including DivX, and XviD files.
The trial version of this app is fully-featured and despite a little lag when applying effects, it works very well.