The term was coined by the poet and columnist Nico Scheepmaker at the end of the 1970s. It is named after Droste, a Dutch brand of cocoa, whose box has a picture of a lady carrying a serving tray with a cup of hot chocolate and a box of the same brand of cocoa.
Droste Effect flash movies - I
Droste Effect flash movies - II
If you need any help here is the tutorial.
Source: 1, 2 & 3.
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