In fact, in that story the guy might have had a lot of "miles", but it is only $12,500 in dollar equivalent. It means that this "great" hack is a hack, without "great". Please correct me if I am wrong.
On top of the $1 = 1 mile business, for whatever reason, lots of airlines hand out frequent flyer miles like candy. American Airlines used to give you 1,000 miles ($500 worth, as you get double points with AA services) just for booking a vacation through their service... the pudding is another example of this. There's lots of potential for bonus miles, basically.
So, depending on how you want to look at it, doing this without rewards, he earned $1,250,000 worth of miles for around $3750. With rewards, it could be anything, but surely he paid the minimum amount.
[1]: http://www.citicards.com/cards/wv/faq2.do?screenID=801&s... [2]: http://www.aa.com/pubcontent/en_US/disclaimers/free-ticket-a...