This is a variation on the "Sliding Doors" technique of doing buttons. For more information (and way better examples, see http://www.alistapart.com/articles/slidingdoors. This was a quick example, and would take additional browser-tweaking to look right in FF and IE at the same time, but it's not far off.
Demonstrating a problem... you can see the white bg of the left-side button bg image on a darker bg:
The left corners are there, of course, to cover up the lines from the right-side image that would otherwise appear.