Digitized Sprites refers to the practice of putting pictures or video of actual human beings into video games as sprites. The first widely released game with digitized sprites was a game based around the band Journey released in 1983, in which the band members lent their faces. The technology used in that game was initially going to be used for a game where players could snap their own faces into the game. Arcade lore has it that the game was test marketed in an arcade for a mere two days, because on the second day someone got up on a stool and pulled their pants down in front of the camera. Fearing that this would become a common occurrence, marketers pulled the game.
After Journey, Digitized Sprites were used in the TurboGrafx-16 games China Warrior (1987) and No-Ri-Ko (1988), and the arcade game Reikai Doushi (1988), but Digitized Sprites really didn't take off until the game Pit Fighter was released in 1990, which was a fighting game available for a host of platforms. In 1992, Lethal Enforcers and Mortal Kombat employed actual actors to act out the possible moves of the characters. Throughout the 90s, a whole host of games with Digitized Sprites came and went. Many believe that digitized graphics have aged badly by today's standards as opposed to drawn sprites.
Although mainly used to represent humans, there are a couple of games that use the technique to digitize clay characters. The first example of this was Reikai Doushi in 1988, followed by Mortal Kombat's Goro in 1992. Other examples of this were seen in the games Claymates and Clayfighters. Other games used sprites digitized from 3D models pre-rendered by (then) powerful computers, such as Donkey Kong Country and Killer Instinct. Since the mid 90's the style has been used only sparingly thanks to the increase in technology which provided better options for providing lifelike graphics. Nowadays the technique is almost entirely used to invoke the feeling of mid 90's video games.