How do they do this......

[Ankesh]

I had done some research on this some time back and had found it too expensive to start at that time.

To get those shorter phone numbers - seach for "SMS short code" services.
To charge people to send you SMSes - search for "Reverse SMS billing" or "Premium SMS."

The rules and regulations differ from country to country.

In India, you have to pay a monthly rental fee for the number plus pay for a minimum of 100,000 replies every month - which made it very expensive for a small biz to use such a service.

It may be different in USA.