Here's a link to a flash animation about their process:

http://www.coskataenergy.com/process_movie.html

They convert the biomatter into "syngas" and then pump it into a bioreactor where microorganisms consume it to produce water and ethanol. The water is then seperated out of the ethanol.

Apparently it reduces the required energy by 50% and produces 100 gallons of ethanol per ton of biomatter.