They're fondant. Here's the link that started it all. Sharon Wee sells a tutorial.
There's a free tutorial at mycakeschool, although it's a bit different, but it would give you an idea of how it's done.
AThat seems so easy. I think I'll give it a try.
You could also make them out of buttercream with the 1M tip!
Here is another tutorial: http://www.lovelytutorials.com/forum/showthread.php?t=5184