I've seen it before too, and yet I don't recall any fonts being made that way.

It could, however, be achieved by using a titling font instead of the regular caps.

This is seen in children's books, especially those that seek to draw attention to words that start with the same letter. I'm not aware of any fonts made this way, and it isn't really necessary since character styling in any decent page layout app can achieve the result.

Is there a name for it?

In-line drop caps?

...

I believe that URW has done some display fonts that way.

It has quite a luxurious and regal feel to my eyes.

The tie to children's lit seems interesting, maybe perhaps because royalty can behave like children? ;-)

Where did this style come from?

I'm guessing from the metal days when -to maximize size- titling (i.e. caps-only) fonts used the space below the -nominal- baseline.

hhp

I found one of the URW fonts I remembered, called Antique Olive DC D. It is not C/lc as I thought, but is a C/sc font with the large caps centered vertically on the small caps which are base-aligned.

I recall someone telling me when I first saw it in the late nineties that it was a style of alignment popular in Europe but I kind of think that is not true. I had never seen anything like it, and still don't have any idea why it would be useful.

We had a thread about this kind of initials, but I don’t know what kind of keywords use to find it again.
By the way, this kind of setting has something victorian, no?

Some font somewhere has done this (or perhaps I'm just remembering some books from my childhood), either way I'm not imaginative enough to come up with this on my own.

I think the term drop cap works, except that drop caps in scribal work only appeared once a page or so.

I'm guessing from the metal days when -to maximize size- titling (i.e. caps-only) fonts used the space below the -nominal- baseline.

Hrant, might you be able to produce a pic of this?

http://www.monotypeimaging.com/images/tds/zapf/ZAP-S3-Image.jpg

hhp

In that image I see a capital T, I and N, and they are upside down to the camera, so you can't really even see the base line. There must be a better pic out there.

You can see there's no room for descenders.

hhp

I am currently working on a typeface that has a set of alternate swash caps that does this. The weight of these enlarged descending caps is not a big change from normal. The face is what you might call a fantasy face. It is meant for young readers along the lines of Redwall books.

So, Victorian?

Not trying to be Victorian, or any particular era. I am trying to be on the organic side. It relates to a book I am writing.

To your last question: Papyrus

No no, ricardo brought up the possibility of this text treatment being Victorian. Whatchall kno bout dat?

Probably my comment was completely off.
Anyhow, looking for victorian brought up these kind of typefaces:
http://www.myfonts.com/fonts/nicksfonts/grand-prairie-wbw/
http://www.myfonts.com/fonts/spiecegraphics/asteroid-primo/
http://www.myfonts.com/fonts/p22/victorian-swash/
http://www.myfonts.com/fonts/spiecegraphics/zinc-italian-sg/

And surely this kind of treatment is used in cartouche fonts.

Victorian/Edwardian it is…

http://www.myfonts.com/fonts/nicksfonts/inglenook-corner-nf/

One typeface where this feature has been put to a very good use—functional, not stylistic—is Bell Centennial.