This is a great example of a Straw Man. A Straw Man is a fallacy in which one attempts to win an argument or debate by intentionally misrepresenting the position of one's opponent. This misrepresentation generally takes the form of assuming that the opponent adopts the most extreme version of a view possible. The idea here is that it is much easier to knock down a straw man than a real person, so one creates a false version of an opponent's position; a version that is much easier to knock down. This is a fallacy of course because, when one commits a Straw Man, one is no longer arguing with a real person, but with a false construct one has created in one's own mind.
In the clip above, the McCain campaign is suggesting that Barack Obama supported a bill to teach kindergartners about sex, something that, on the face of it, sounds wildly inappropriate. It makes it sound like Obama was supporting something along these lines (NSFW). However, if we look a little more closely at what the bill Obama supported actually did we can see that the above campaign ad seriously distorts Obama's position. And this, of course is exactly what one does when one Straw Mans.
As a final note, I want to stress the importance of employing the principle of charity when engaging in debate or discussing someone's views. That is, when reconstructing someone's position or argument you should always give the most charitable interpretation of that position possible. In this way, Straw Men are avoided, and genuine debate and discussion can occur.