Haven't done it in years, but I used to make vases, etc, from bottles and jars by half-filling them with oil, then plunging a red-hot poker into them.

Don't know the physics, but for some reason, 9 times out of 10, the glass parted cleanly along the level of the oil.  Sharps edges cleaned with patient use of some wet&dry.  Not to be tried at home these days, I suspect.

I made a bunch of these when I was in college, but we had a full scale glass lab with an annelear.  From what I have read, the at home bunch needs can also accomplish something close.

Step 1: Use a jig to create a score line that runs the circumference of the bottle (the bottle can be scored with a diamond or carbide tipped tool for scoring glass)

Step 2: Use a second jig and blowtorch (as seen in video) to evenly heat bottle, as the bottle is heated the score line created in step 1 will actually crack the glass

Step 3: Use the bucket of water to complete the seperation of bottle top from bottle bottom

Step 4: Sand, sand, sand with various grits of paper to smooth drinking edge. 

Links of interest

http://www.cowtown.net/mikefirth/bottle.htm

http://www.riordanartistry.com/htm/faq/sect14.htm

http://glassmart.com/ebc.asp

http://www.doityourself.com/stry/makelamp 

Spiffy.

My guess as to how this works:

1. Setup a jig to hold a wine bottle and a butane torch, so the flame from the torch just touches the wine bottle.
2. Lite the torch.
3. Place the bottle in the slot and turn it slowly, to spread the heat all the way around the bottle in an even line.
4. After giving the bottle a couple of turns and it's gotten good & hot, put the bottle in a bucket of water.
5. If the top doesn't immediately break off, try tapping the top of the bottle against the edge of the bucket a couple of times.