This is calculated by taking the state-by-state probability to win as listed on Intrade, assuming these are all independant events, and the computing the probability that Obama will win more than 269 votes.
Shortcomings: Many of them. The probabilities are not really independant, the Intrade markets aren't really liquid enough, the commissions charged by Intrade distort the markets.
Probability to win over time. (from Sep 8th till now, 30 min intervals)
State-by-state map showing current probabilities to win the state. White states are 50/50, Red have a Republican lead, Blue have a Democrat lead.