From MotorTrend:

How does the Coskata system work? Like most other cellulosic ethanol conversion processes currently under development, it enlists specialist microorganisms to do much of the work, but rather than using them to break down starches and complex carbohydrates into sugars that can be fermented and distilled, these carefully selected and bred anaerobic (hate oxygen) bacteria assemble ethanol molecules when fed a diet of carbon monoxide and hydrogen gas better known as syngas (the stuff that many towns once used to illuminate their gas streetlamps). The syngas is produced by first superheating the carbon-rich waste materials to 1000 degrees C (1832F). This "gasification" process breaks the long carbon chains into tiny bits in a reaction that actually releases energy after an initial input of energy to reach that temperature. The next step is a scrubber that removes detritus (like steel from tire carcasses and the like) and delivers syngas to the bioreactor. After the designer bugs have feasted on this syngas and water buffet, the ethanol they sweat out passes, along with the water, into an ethanol recovery gizmo that consumes 50 percent less energy than a typical distilling process would. The vaporized low-proof ethanol/water gas is passed through tubes made of a special hydrophilic (loves water) coating that separates the steam, leaving a 99.7-percent pure stream of ethanol coming out the other end while the water gets recycled.

One of the secrets to this system's success is energy management. The enormous heat that must be extracted coming out of the gasification step can be harnessed to run electric generating turbines or for uses that may suit a co-located facility. Imagine a paper mill in which this waste heat dries the paper slurry and the waste wood materials feed the reactor.