Teacup is just a term to describe a small version of a breed; it is not a standardized term, however. You'll often hear of teacup poodles, or teacup yorkies etc. Just like they have names for large versions of breeds. A large sheltie, for instance, would be called a "throwback" sheltie.

I have to disagree with their not being teacup shelties -- maybe the word "teacup" isn't necessarily the word to call them, but there are small or undersized shelties regardless.