Folks, I've seen a lot of explainations for this trick, and they all fail one way or another.
There is, of course, a simple explaination which is clever both because it is simple and because it totally baffles us. Because of the simplicity we think we can figure it out, and because of the magician's ability to think way, way outside the box we're not likely to figure it out. But because we think we're smart and know the answer is simple, we'll just keep pontificating. 45King is right: once we do figure it out, we'll be pissed becuase the simplicity fooled us and sucks the joy out of not knowing.
There are a few great tricks. This is one of them, along with up-close sleight-of-hand, and Teller drowning in a glass box. Even if I knew the trick, I'd be endlessly impressed by the art of doing it so well.