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That's Dictation > http://support.apple.com/kb/HT5449
OS X Mountain Lion includes Dictation, so you can talk what you want to type on your Mac. To turn it on, open System Preferences > Dictation and Speech, turn on Dictation and choose your language.
When you want to use Dictation, double-press the Fn key and talk. When you have finished, press the OK button.
Also, there are other apps that do it, like Dragon Dictate, but Dictation is free