This dreamy cave is Modra Spilja, The Blue Cave, located off the coast of Croatia. One of those hard-to-get-to locales, it is very much worth the effort to see the Bisevo/Balun Cove. The effect is caused by sunlight filtering in through an underwater opening from the sea, and reflecting off the limestone floor.
It has been there for ages, but wasn't always accessible by raft:
Though Croatian fisherman have known of the blue cave since ancient times, it wasn't until 1884 that a (relatively) easy entrance was blasted out with dynamite. Before this small hole in the side of the rock was opened, the only entrance into the cave was to dive underneath the rock wall in just the right spot.
Link with video.
http://www.youtube.com/watch?v=AYMtb0pNup0
The Island also has one of the longest sea caves, it goes back almost a mile, and if the tide is right can be explored with kayaks.