How was a pay to ip transaction created? How can you create a pay to ip transaction or is this not possible with the current client? 

If so why was it disabled?
Pay-to-IP transactions were removed in 0.8.0.

Such transactions worked by essentially contacting the IP address you were sending to, seeing if it was running Bitcoin, and receiving a public key from the Bitcoin node there to pay to.

However, this wasn't very secure. There was no way to prove that the response was coming from the IP address you tried to contact - It was trivial for a man-in-the-middle attack to simply hijack your request and reply with their own bitcoin public key, effectively stealing the payment.

Here is the BitcoinTalk discussion discussing the PR linked above and the removal, with the thought process at play.