The magician borrows a quarter from a spectator and allows another spectator to select a packet of sugar from the sugar-packet caddy on a restaurant table. The magician holds the sugar packet and coin in one hand and squeezes them together. When the magician's hand is opened, the coin is gone! The magician then opens the packet, revealing the coin within.
This complex-looking trick has a very simple secret -- the coin is already in the sugar packet. For years, the magic community has kept secret the art of what is called "packet peeling." An expert packet peeler can peel apart the edges of a packet of sugar, moist towelettes, etc., and reassemble it so that a layman would not know anything is awry.
The details of the art of packet peeling are too numerous to go into on the limited space of a Web page, but the basic idea is that a packet of sugar (or other item to be opened) is held rigid in the hand and then tapped on its edge repeatedly on a hard surface such as a table, car hood, or safe. Eventually, after a few hundred firm, accurate taps, the edges of the packet will begin to separate. Once they have separated completely, a foreign object such as a coin can be inserted and the packet resealed with two-part epoxy and a clamp.
To perform Inside Sugar, the magician prepares enough packets of sugar with quarters in them to fill a restaurant sugar-packet caddy. After sitting down at the table, the magician switches the packets for those already present and is ready to go. A quarter is borrowed and a packet of sugar selected -- it doesn't matter which packet is selected, because they are all prepared. While the packet is being selected, the magician casually slips the quarter into a shoe.
The magician takes the selected packet of sugar and squeezes it, saying that the sugar and the coin are being pressed together. If somebody says they didn't see the coin, the magician can tell them to pay more attention next time.
When the hand is opened, all that remains is for the magician to tear open the packet and show the coin. The coin will be so coated with sugar that it will look just like the original coin, even if the original coin was marked or its date memorized.
Magicians don't always prepare their sugar packets before reaching the restaurant. Some are expert enough at packet peeling that they can excuse themselves to the bathroom and prepare a few dozen packets before returning to the table. Regardless of whether they prepare ahead of time or not, magicians always take the remainder of the prepared packets with them so that the next person to use the table will not accidentally discover the secret. There needs to be no deception when taking the remaining packets -- magicians know that most people take it for granted that everybody takes a few packets of sugar, some silverware, or whatever when they leave a restaurant table. It's not that big a thing to dump the entire contents of the sugar caddy into a pocket after paying the bill.