This seems to be done by an extraordinarily smart guy - Neil Fraser. He's behind "google-diff-match-patch" [1] project, which is AFAIK the machinery behind realtime collaboration on google docs. Definitely worth watching. [1] http://code.google.com/p/google-diff-match-patch/
Not a big fan of what amounts to fairly typical coding via drag and drop, but this is a fantastic resource. I have a project in my queue that will need Google Doc collab functionality so this is very useful. Cheers.