This often happens because the air in between you and the light has
different temperatures in different places, and is blowing around. Hot
air has a smaller refractive index than colder air, and so a mixture of
hot and cold air will bend light a little bit. Just look through some
hot, rising air over a stove, or over a road on a hot, summer day (you
may even see mirages!), or through the exhaust of a jet engine (be sure
to be inside the jet plane or far enough away from it to be safe!).
Objects viewed through moving air of different temperatures will appear
to wiggle and be blurry.
At night, if you see point light sources, the light will sometimes
be focused on your eyes and sometimes a lot less will be focused,
making the light appear to twinkle. Stars do this, hence the famous
p.s. Another effect I've seen is one when flying over a city at
night. Streetlights are sometimes obscured by trees, and as you move
overhead, streetlights become visible or are hidden by the leaves in
the trees and will appear to blink.
(republished on 07/29/06)