The APA citation basics write:
If you refer to the title of a source within your paper, capitalize all words that are four letters long or greater within the title of a source: Permanence and Change. Exceptions apply to short words that are verbs, nouns, pronouns, adjectives, and adverbs: Writing New Media, There Is Nothing Left to Lose.
(Note: in your References list, only the first word of a title will be capitalized: Writing new media.)
I realize that this is a matter of choice and convention, but as I read scientific publications in Computer Science, it strikes me how often these practices are mixed. In the document, the "capitalized" version is predominant, but in reference lists, they are quite often mixed.
When I was in school I remember being taught that this was the right way of writing headlines, so I understand those who force bibtex to cite this way by curly-bracketing first letters.
But what is the reason for this convention? Is it fair to say that it is incorrect? Otherwise, how can it be argued to use small caps in the reference lists?