Getting the Movie Digital Zoom feature to work on the Canon T3i is a little tricky because:
1. You have to be in video mode
2. You have to have selected a 1080 mode
3. That particular 1080 mode has to be turned on for Movie Digital Zoom (there is an off version)
There is a confusing way to do this through the menu, but it is easier to do through the Live View when shooting video, as demonstrated in this video here.
A few notes about Movie Digital Zoom: It really helps to have a tripod with a "fluid head" which is something used for video. The further away you are from your subject, the greater movement and vibrations come into play. So if you have a 200mm lens, on a 1.6x body = 320mm. If you are shooting video at 3x, that is like having a 960mm lens. If you get crazy and try to shoot at 10x, then it would be like having a 3200mm lens, which if you are trying to hand hold is ridic-ulous. I need to go out and do some tests on what is happening with the distortion between 3x-10x. My hypothesis is that the 3x should look good (based on how I believe the camera is using a smaller part of the sensor to get an equivalent 3x focal length, but the 5-10 should look much worse as it will have to "make up" pixels" to shoot at that resolution. This is the best way to activate and use Movie Digital Zoom on the T3i: