It's not magic, really, it's just a QuickTime movie embedded in a web page, but the fact that it displays YOUR iSight, even though it's not your web page is a little disconcerting! As Chris says, it's pretty easy to do this yourself. Install Apple's Developer Tools if you don't already have them installed. Open Quartz Composer. Create a video input and a billboard. Then drag a line from the video input to the image option on the billboard. Now export it as a QuickTime movie and embed it into your web page.
No need to fear it, however. No one else can see you. Everyone who views the page will only see themselves (assuming they have an iSight). I think it's still a pretty cool trick, however, you are free to disagree.