No magic or trick there that I can see. The functionality is contained in the Unix command resetpassword can which be accessed either through Disk Utility on the invisible RecoveryHD volume that is automatically installed on every Lion and Mountain Lion boot drive. Instructions are found in
Apple Document DOC-4101.
If you would like to have the RecoveryHD functionality on a thumb drive follow the instructions in
Apple Knowledge Base article 4848 or even more simply clone a Recovery HD to a thumb drive using Carbon Copy Cloner or Super Duper (of course the trick in cloning is making the RecoveryHD visible to be cloned.
