If this was just a random unsourced picture on the Internet I would probably suspect that it had been manipulated to create the dragon effect. However, it comes from a professional photographer, Noel Celis of AFP Photo, and is hosted on Getty Images. And these sources provide no indication that the photo was manipulated in any way. So I have to conclude that it's real. In other words, that it's a case of pareidolia, rather than photo fakery.
Getty Images offers this caption:
"A fire breather performs in Chinatown in Manila a day before the Chinese New Year on January 22, 2012. The Lunar New Year falls on January 23 and is the begining of the Spring Festival holiday."