This glitch is only able to be done in multiplayer, when one is playing as a Spartan. It causes the neck to stretch, or sometimes makes the body flop.
To do an example of this, go onto the map Midship, and find one of the shields. Crouch down and keep walking towards the shield, so you don't bounce away. Get somebody to 'assassinate' you. If you do this right, the Spartan's head should go through the shield with the body on the other side. The shield makes the body pull away, but it can't because the head stops it from doing so. This causes the Spartan's neck to stretch like a rubberband. Sometimes it flops around like a fish out of water.
Also in Halo 3, when a player dies and hit something violently (or, on occasion, is hit by something violently), there's a high possibility they stretch, but it only happens for a split second. Sometimes AI Marines stretch.
Also See
Hollywood Halo-neck stretch glitch
http://www.youtube.com/watch?v=UGL7Z6NQi3Q -A highly noticable whole-body stretch that was actually viewable at normal speed.
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