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Basically they used a mild detergent to dissolve the cells from the lungs of dead rats. What remained was airway structures and the vascular system, along with collagen and other proteins.

The researchers then placed the material in a glass jar where lung cells from rat fetuses were injected into the material.

Nutrients were also added to help the cells grow.

After a few days, the material had developed the structure found in a natural lung.

They added, 'In vitro, the mechanical characteristics of the engineered lungs were similar to those of native lung tissue, and when implanted into rats in vivo for short time intervals (45 to 120 min), the engineered lungs participated in gas exchange.' [Paper]

And, 'Although representing only an initial step toward the ultimate goal of generating fully functional lungs in vitro, these results suggest that repopulation of lung matrix is a viable strategy for lung regeneration.' [Paper]

Page three concludes with a video of the transplant.