More detail has surfaced on how the Palm Pre text manipulation works thanks to the guys over at PreCentral.

So just how does text manipulation work on a capacitive touch screen such as the Palm Pre? Well this is apparently how…

The user holds down the Alt key thus going into “Trackball Mode” which will evidently let you swipe one character at a time. Furthermore the user can also so the same thing with the shift key and result in selecting text as they swipe. There is also a “Smart deletion” where the user holds down the delete key and can thus delete a complete word, and there is also an auto-correct feature as well.

One last thing, the video below shows the Shift select method briefly.