Production Design
Between Worlds
The Phantom Menace is a transitional film in the production of the Star Wars films—and not just because we see Anakin transitioning from being a boy to being a man. (Aww. They grow up and become Dark Lords so fast.)
In fact, it's also one of a group of films released in the mid-90's to the early 2000's that represent a transition in the film industry—one that saw a shift from traditional modes of production to the digital age.
During its production, the filmmakers used several practical, old- school techniques that would be phased out in later Star Wars films. At the same time, they utilized new techniques that would become prominent in the production of the next two films.
For example, The Phantom Menace was the last of the Star Wars films to be shot in 35mm film before switching to digital cameras for Attack of the Clones and Revenge of the Sith.
But it was the first film of the three to use a process called previsualization, a type of digital pre-production planning that allows the filmmakers "to build full-fledged 3D models of each scene" that "portray dimension, scale, and perspective" better than traditional storyboarding. (Source).
Something Old, Something New
But it's The Phantom Menace's marriage of many classic techniques with all the newfangled gadgetry provided by the digital age that gives it its particular style among the Star Wars films.
Like the original, the movies were also filmed on studio sets, but unlike the original, the sets were only built as tall as the actors. The remainder used blue screen, and special effects were added later to fill in the backgrounds and details. This choice didn't save as much as it could have, though, as Liam Neeson's extra height cost the set crew an extra $150,000 in construction. Liam's a big boy. (Source)
The movie was also filmed on location at the Reggia di Caserta in Italy for the Naboo Royal Palace scenes and returned to Tunisia to portray the desert planet of Tatooine. In Tunisia, the filmmakers constructed complete sets to represent the spaceport of Mos Espa (again, a lot like the original). (Source)
The feature's creatures followed a similar trend as the sets. Some of the aliens came to life thanks to traditional creature effects like masks and animatronics, such as Viceroy Gunray and the Jedi masters on the council. Others were animated entirely by computer, like Watto and Sebulba. (Source)
So. Many. Effects.
Speaking of special effects, The Phantom Menace contained more than any other film at that time. It contained roughly 2,000 digital visual effects, compared to the original's 360 visual effect shots and Return of the Jedi's 900. That's a lot of Industrial Light and Magic. (Source)
And the special effects were of a caliber previously unseen. Jake Lloyd (Anakin Skywalker) sat in an on-set podracer cockpit and was filmed in front of a bluescreen, but the desert imagery and the lightning-fast pods were entirely computer-generated imagery. Thanks to some post-production magic, the two are blended together almost seamlessly, even by today's standards. (Source)
The Amazing 100% CGI Man—Er—Alien
Then there's Jar Jar Binks. Ahmed Best, the actor who portrayed Jar Jar, was on set with the other actors to give them something to play off of. Best wore a latex costume with a Jar Jar-shaped helmet. The original plan was just to replace Best's head with computer graphics, but the special effects team found that it took half the man hours to create a fully animated Jar Jar in Best's place. (Source)
The result is one of the cinema's first main characters to be so realistically portrayed entirely in CGI. Writing for Entertainment Weekly, Keith Staskiewicz points out that Jar Jar beats out Gollum, often cited as the first main character realized by CGI and motion capture, in The Lord of the Rings: The Two Towers (2002) by three years. (Source).
And despite our cultural eyes having adjusted these past fifteen years to see the digital "strings," as it were, the character still looks good for such a first. (Even if our ears, on the other hand, never adjust to that voice.)