[jonnythan]

AppsToSD doesn't trick the phone. The internal storage of the phone has a few different filesystems. One is for /data, one is for /system, etc. The free space on the filesystem mounted to /data is what is shown as available internal memory under Settings.

What AppsToSD does is mount a filesystem that exists on the SD card to a location under the /system directory (specifically /system/sd/app). It then deletes the /data/app directory and recreates it, but as a symbolic link to /system/sd/app. It essentially replaces the /data/app directory with a shortcut to /system/sd/app, which is on the SD card.

When the phone is reporting the free space, it's reporting the free space on the actual filesystem mounted to /data - it doesn't follow symlinks to other filesystems.