This is almost certainly done using Apple’s Core Storage logical volume manager, introduced in OS X 10.7. As a volume manager, Core Storage has the chops to weld the two separate drives together into a single entity and handle the relocation of files between one tier and the other.
I am 100% certain this is HFS+ sitting on top of CoreStorage based on comments made to me by by certain former coworkers who are still at Apple.
With Fusion Drive enabled, Apple creates a 4GB write buffer on the NAND itself. Any writes that come in to the array hit this 4GB buffer first, which acts as sort of a write cache. Any additional writes cause the buffer to spill over to the hard disk. The idea here is that hopefully 4GB will be enough to accommodate any small file random writes which could otherwise significantly bog down performance. Having those writes buffer in NAND helps deliver SSD-like performance for light use workloads.
That 4GB write buffer is the only cache-like component to Apple’s Fusion Drive. Everything else works as an OS directed pinning algorithm instead of an SSD cache. In other words, Mountain Lion will physically move frequently used files, data and entire applications to the 128GB of NAND Flash storage and move less frequently used items to the hard disk. The moves aren’t committed until the copy is complete (meaning if you pull the plug on your machine while Fusion Drive is moving files around you shouldn’t lose any data). After the copy is complete, the original is deleted and free space recovered.
Update (2012-10-25): Apple’s HT5446:
Presented as a single volume on your Mac, Fusion Drive automatically and dynamically moves frequently used files to Flash storage for quicker access, while infrequently used items move to the hard disk. As a result you'll enjoy shorter startup times, and as the system learns how you work you'll see faster application launches and quicker file access. Fusion Drive manages all this automatically in the background.
Reliability: with the Fusion drive, if either drive goes south then the system dies. Two drives will be less reliable than one drive, end of story. That’s because the Fusion drive approach apparently is either/or: a file is either on the SSD or it’s on the hard drive; the SSD drive is not a write-through caching solution but a sort of extra-smart JBOD. A caching solution would have had fault-tolerant aspects and supported more than one hard drive, but that involves its own complexities also. Bottom line is that SSD prices are steadily dropping and that simpler is better (but at a higher price for a larger SSD, for those who want guaranteed faster performance without the complexity).
Update (2012-10-31): Lee Hutchinson:
Two blog posts by Tumblr user Jollyjinx have shed some more light on the inner workings of Apple's Fusion Drive.
Update (2012-11-03): Lloyd Chambers:
Hence I dismiss the jollyjinx.tumblr.com ‘Fusion’ claims in their entirety as a unreliable, and a failure of test methodology.