I don't know exactly why it happens on the Wii, but this exact same effect used to happen when PC games would run in 16-bit colour, and not 32-bit. Again, I don't know if this is the problem with the Wii in general, certain games, or even if that's what's causing it in the first place, but that's what generally causes it. I'm sure if they use compression on some of the graphic files, this effect could happen as well.
EDIT: It happens in NMH when you hold down the run key on Travis, and smoke starts coming off his feet. You'll notice it most when you have a colour transitioning into different shades.