Cliff's Notes: The Absolute Poker cheaters are part of an inside job - either a rogue employee (bad apple) or rogue company (bad orchard).
Long Version: 1) During a tournament played by cheater 'Potripper,' the person who ended up coming second ("Marco") thought he was cheated. He emailed Absolute, and they sent him a hand history file - an XLS file.
2) Marco opened up this file, it seemed all gibberish to him, and he didn't think anything of it.
5) In passing discussion, Marco mentions he has this file. He shares it with a few people, including N 80 50 24(pokerdb.com maintainer, maker of The Poker Film, part owner of Bluff Media) who analyses what is in this file
6) Nat (N 80 50 24) & 2p2 poster Snagglepuss discover that this file is a complete hand history for the tournament - showing every table, and all hole cards of every player.
8) In further analysis, Nat + Snagglepuss discovers that this file contains IP addresses and user details (including email addresses) of people observing the table
9) In #8, they discover user #363 is observing PotRipper's table the whole time
10) At the start of the tournament, for the two hands that user #363 is not observing the table, Potripper folds preflop. He doesn't fold another hand pre-flop for 20minutes, when he open-folds with KK held by a player behind him.
11) The IP address recorded for user #363 tracks out to be a user who uses email on an Absolute Poker server hosted by the Kahnawake Gaming Commission (More info here)