How does IsPostback technically work?

The page looks for the existence of a __PREVIOUSPAGE form value.

From Reflector:

public bool IsPostBack
{
    get
    {   //_requestValueCollection = Form or Querystring name/value pairs
        if (this._requestValueCollection == null)
        {
            return false;
        }

        //_isCrossPagePostBack = _requestValueCollection["__PREVIOUSPAGE"] != null
        if (this._isCrossPagePostBack)
        {
            return true;
        }

        //_pageFlags[8] = this._requestValueCollection["__PREVIOUSPAGE"] == null
        if (this._pageFlags[8])
        {
            return false;
        }

        return (   ((this.Context.ServerExecuteDepth <= 0) 
                || (   (this.Context.Handler != null) 
                    && !(base.GetType() != this.Context.Handler.GetType())))
                && !this._fPageLayoutChanged);
    }
}

Postback actually works fairly simply by submitting the form to itself (for the most part). The javascript code is actually put on your page:

<input type="hidden" name="__EVENTTARGET" id="__EVENTTARGET" value="" />
<input type="hidden" name="__EVENTARGUMENT" id="__EVENTARGUMENT" value="" />

function __doPostBack(eventTarget, eventArgument) {
    if (!theForm.onsubmit || (theForm.onsubmit() != false)) {
        theForm.__EVENTTARGET.value = eventTarget;
        theForm.__EVENTARGUMENT.value = eventArgument;
        theForm.submit();
    }
}

Marks answer shows you the server side code that is run.

Is Postback is implemented as such (using Reflector):

public bool get_IsPostBack()
{
    if (this._requestValueCollection == null)
    {
        return false;
    }
    if (this._isCrossPagePostBack)
    {
        return true;
    }
    if (this._pageFlags[8])
    {
        return false;
    }
    return (((this.Context.ServerExecuteDepth <= 0) || ((this.Context.Handler != null) && !(base.GetType() != this.Context.Handler.GetType()))) && !this._fPageLayoutChanged);
}

So unless you take into account all these parameters, it will not be possible to trace it.