Earlier quoted context omitted.
Found the answer at http://shloosl.com/#more-tips "For now, we accept only two types of keys. Chances are your house key is one of these."
I assume they're supporting Schlage SC1 and Kwikset KW1 keys which fit the two most common types of five pin locks in the US. Both of these keys have a pin coding - each of the five pins has a value from, IIRC, 1 to 9. With a little practice, one can decode keys visually in a few seconds, I can't imagine it being hard to write an image processing algorithm to do it.
I've decoded keys that I've seen people carrying on rings on their belts (and, in many cases, the pin values are stamped right on the key). I don't carry keys where people can see them, but I'm a little bit paranoid. With the advent of this service it probably pays to be a bit more paranoid, since somebody could take a picture of your key, send $5, and get a copy w/o knowing anything about pins and tumblers.