I've been a typography buff for years--I even reflexively groan when I see ads that use Helvetica--so this Flip Web site was just too entertaining for me to pass up.
It relies on a property of the Unicode character-encoding scheme, which has a vast array of letters and glyphs from non-Roman alphabets. Think of it as ASCII on steroids.
Unicode has enough characters that many standard Roman alphabet characters have upside-down equivalents. When you type letters into the upper box, they appear upside down in the lower box via Unicode translation, according to the site's designer, David Faden. Very clever, though Firefox's spell-check wasn't fooled, and capital letters and numbers don't work.
"I can't claim any particular interest in typography," Faden said. "It is fun to dig through the Unicode charts to see what treasures are buried there, though."