Here's quick video I put together to demonstrate the "Video Stabilizer" effect that's available in Adobe Premiere Elements. This video is split into three sections -- no stabilization on the left, 5% stabilizer in the middle, and 10% stabilizer on the right. Note that all three sections were taken from the same source video.

According to the Premiere Elements help file, the stabilizer works in the following method: "The Stabilizer effect removes unwanted camera shaking by analyzing the video image and tracking objects in the picture. If the entire picture moves suddenly, the effect compensates for the move by shifting the image in the opposite direction, thus smoothing out the camera jitter. You can specify the amount of smoothing. When the effect moves the image, it leaves empty video on one side."

Because Premiere Elements shifts the image to compensate for the camera shaking, it causes the strange effect to the black bars you see in the video above. In practice, you can get rid of the black areas by upscaling the video and cropping off the unwanted black areas.

Note that in this video, there's a significant difference between no stabilization and 5% stabilization, but little difference between 5% and 10% stabilization. I suspect that the amount of stabilization needed varies with the shakiness of the source video, but it's obvious that a shaky video can be dramatically improved by using the Video Stabilizer effect.

For a complete example showing the Video Stabilizer in action, please check out the following two videos:

Laveen in HD (stabilized): http://vimeo.com/4840667
Laveen in HD (unstabilized): http://vimeo.com/4841654