They're apparently not using the heavy UI that you would, like X-Windows. Plus they probably stripped a lot of stuff out of the kernel that wouldn't be needed for their application.
My "heavy" UI uses about 400M out of the 1G of memory in the netbook. You can't buy a netbook with less memory. Apps add more, but no more than Google's apps. Using powertop I see that power consumption of the UI is perhaps 1W more than the minimum 10W it uses at the console with no UI running (mainly due to Intel chipset inefficiency).
As for the stripping the kernel, that's useful. But any random linux geek can do that.