This is done by off-loading the creation of DOM elements to the server side, which returns complete constructs that are then injected live through innerHTML. While this method is slightly more verbose than just peddling data across the wire, it’s immensely easier to develop."
See also Sajax, Simple Ajax Toolkit (did that buzzword catch quickly – there’s even a dedicated blog!).
04/12/05 update: AJAX .NET Wrapper.
06/28/05 update: Microsoft to debut Atlas development framework at PDC, Atlas Project.