ok forget it im not calling it physics anymore.
when that three legged alligator's tail swayed, and how it walked oddly, and how tweeties head shifted all over the place, what are those called? someone give me a name
The way things are heavy and pulled by gravity is part of the physics engine, namely, gravity simulation or whatever (physics involves mostly things like gravity, inertia and collisions). The way bones kinda try to constrain motion (so you don't look like that girl from the Exorcist) is called Inverse Kinematics, so that's what keeps the head from falling into the ground and what sways the tail.
Ragdolls physics is just when a dead/unconscious character becomes all limp and lets gravity and physics do its work. In combination with IK it can be applied to upright characters so they react realistically to things like punches. There's a trick where you apply IK to only the feet of a char but leave the rest of its skeleton obeying a prerecorded animation, to make for instance, the legs conform to the terrain; it's sort of as if you had a hovering butt at a predetermined distance of the ground and more or less positioned your thighs in any way you wanted but your lower legs just hanged out until they hit something. They use that in Fallout 3 and I assume they use it in Spore too.
Spore actually uses a lot of these inverse kinematic things but mostly it's just a sort of metaball character creation that adds bones dynamically. It's more like having your own simplified 3D animation package, and having the animations slightly modified to fit the new monster skeletons. But once that's done, it's not different as any other game where the animator has made all these things by hand.
It's like the Google SketchUp of creature makers with a sort of integrated demo walking engine.