The sprites are stored in custom encoded strings in a format that only allows 4 colors for each sprite but in turn only takes up around 40-60 bytes per sprite.
There is also MIDI music embedded as Base64-encoded data: URI's. No music for IE, though, and it seems all the other browsers each have different, minor problems with it, but it "sort of" works.
It is by no means a complete clone or anything, it's not even an entire level and several key things are missing, such as mushrooms, Koopas and stuff. It was merely done as a sort of proof-of-concept and to see how small it could get.
Performance varies somewhat Between the different browsers, but Firefox, Opera, Safari and IE are all playable. The latest WebKit nightly seems to give Safari a speed Boost.
Be sure to click the mouse on the game if Mario won't move. When you die, you have to reload the page to start over. And yes, you can move left. Sorry.