Generally and as per the pattern, it's a process of adding stitches to various points of the work, sewing (usually machine) and the cutting (yes, cutting). The process creates neck opening and arm hole openings which allow for sleeves to be joined.
I haven't done the technique myself yet...other than recently doing something similar to make a tie point. It turned out fine. The roughest part is having enough confidence to actually cut your work after you've properly secured the knitted stitches in place.
A few links to info, pic's and procedures in steeks/steeking can be found here, I found the link to the Knitty article particularly helpful.
On the subject of Steeking and thanks to KellyK for previously mentioning this reference.