Making miniatures is a venerable old movie making technique just like rear screen projection. I recently watched the beginning of Citizen Kane, and from what I gather the establishing shots of the palace were of a miniature. Another good example is the beginning of The Bride of Frankenstein, there is a wonderful shot outside in the thunderstorm dollying up to the window of the castle. Cool looking stuff. There are numerous examples, some good and some not so good.
The problem is nowadays many of these fascinating (yet not always 100% convincing) shots are abandoned in favor of digital effects. You do it all with the computer using the latest state-of-the-art effects package and then watch your film age very quickly. I think the best of both worlds is using the technology, but also not being afraid to add the production value of a detailed miniature.
