I don't even know what the technique is called, or I would've asked about it!
It's fondant icing, over fondant icing...but it's coming down the top sides of the cake just a little bit. Like in this picture http://www.cakecentral.com/modules.php?name=gallery&file=displayimage&pid=1207692
How do you make the cut? Cut the fondant wavy while on the cake, or before you put it on?
Those look like they were cut out before being put on the cake. You should pm annethered and ask how. Then let us know how!