The magnet is placed over the cross, which put the machine to sleep. Hitting a key on the keyboard woke it up. If the magnet is in the right place the internal display stays disabled, and the external port can be set to whatever resolution you want. (In this case the monitor cranks up as high as 1920x1080.) Once the machine is in this mode you can actually pick up the magnet and it appears the machine will continue running like this until it's rebooted or falls asleep again.
This little vinyl magnet came in a sheet of "Simpsons"-themed refrigerator stickies I found at the Target Dollar spot. Of course you can read how it says "Now it's Marge's time to shine!", right? This weak little flexible magnet is actually just powerful enough to trip the reed switch.
The little penciled cross slightly more visible on the machine's trackpad indicates the approximate location of the reed switch. This machine still has the original display attached, but it's been skinned... for a project I'm undoubtedly never going to finish.