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False capitalization is the setter's trick of making a word in the clue look like a proper noun, by changing the case of its initial letter.

Example:
FT 13209 (Alberich): Chap at university's given introduction to Thomas Hardy (6) ROB U'S T

In this clue, the definition "hardy" (adjective) is written with a majuscule to blend with "Thomas" and misdirect the solver into thinking of the author.

Is This Fair?

False capitalization is acceptable, though there may be objections from a purist point of view. The Times crossword (which must be the fairest daily crossword of the present times) allows it, too.

The less controversial way is to place the word with the masked capital at the start of the clue. Since any clue starts with a capital letter, the setter can play on this ambiguity to make the first word seem like a proper noun.

Example:
Times Championship '09 1st Prelim Puzzle No. 1: Bill may have this extra career backing church activity (7,6)

The surface leads us to think of "Bill" as a person's name, but is actually not. It is part of the definition. (What's the answer?)

It's a One-Way Street

The setter can tweak the initial from lowercase to uppercase in any word to dress it up as a proper noun, but can't do the reverse (i.e. change uppercase to lowercase) to disguise a proper noun.

A clue like:

He wrote the joke (7)

for KUNDERA is not fair, because it alters the necessary capitalization of "The Joke". 

Solve These

THC 9692 (Gridman): Confused O'Neill met Salve? (9)
Independent 6781 (Monk): Animal found in Paraguay and China? (7)
Times Championship '09 Grand Final - Puzzle No. 2: Finally sails boat via Calf of Man (5)