Basically it works by storing information about the cookie in varying different places both on the browser and the users local store. This means that if the user deletes their cookies – and even their Flash cookies, any of the remaining stores can recreate the others at any time, thus rendering the user’s desire for privacy and control useless. This is exactly the kind of technology that scares privacy pundits and industry insiders, and reinforces the concept that the ad industry needs to all come out and agree that it will not use tracking technologies unless they are transparent and in the user’s complete control.
This kind of technology would make tracking on the web much easier and more efficient. However, it would be at significant expense to user privacy and control. Just like Charlie was willing to give back his Everlasting Gobstopper, the advertising industry has to commit that they will not use these technologies which could advance their ability to target, but significantly breach users' trust. And then (as I've written about before) organizations like the NAI, IAB and others need to enforce those commitments.
Interestingly, this also brings up another point: browser cookies -- whether first party or third party, are actually quite safe, transparent and completely controllable by the user. Especially when compared to these other "hidden" mechanisms. Instead of driving to the "death of the cookie," we should be working as an industry to promote the education of safe, transparent and user friendly use of user-controllable browser cookies while preventing the use of these more nefarious tracking techniques.