It's just a proxy, you could do the same with a single line of PHP, e.g.:
<?php readfile('<a href="http://api.example.org/?key=APIKEY&action='" rel="nofollow">http://api.example.org/?key=APIKEY&action='</a> . $_GET['action']); ?>
You can use YQL for this and many, many other operations that you would normally not be able to easily do on the client. It is free, deployed in 5+ datacenters worldwide, will cache both directions, and widely used by Yahoo so very unlikely to be turned off. It even offers persistent storage.<p><a href="http://developer.yahoo.com/yql/console/" rel="nofollow">http://developer.yahoo.com/yql/console/</a>
This article would be easier to read if it started off with a quick overview of Tunnel (creates a path in your app that proxies to another site), rather than the how-to. A couple of sentences in the first paragraph would do it.
It's sort of like <a href="http://getr.ws/" rel="nofollow">http://getr.ws/</a> but bound to a specific application platform.