The magician borrows two quarters. The quarters are smashed together with great force and become fused at their midpoints, as if one coin penetrated the other but became stuck half way through like the tragic victim of a Star Trek transporter malfunction.
While spectators are searching for quarters, the magician takes a special piece of glass from its hiding place in a sleeve and hides it in one hand. This piece of glass is mirrored and it has a slot in the middle that's just the right size for two quarters to fit through.
When the magician has the quarters in hand and pretends to slam them together, really what is happening is that the magician is inserting them carefully and precisely into the slot in the mirror so that only half of each coin is visible. When the coin/glass assembly is shown, the top halves of the coins are real but the lower halves are just reflections in the mirror, making it look as if the coins have penetrated each other!
Spectators may freely touch the top halves of the quarters, since they are completely real. It's a very convincing effect, and has been used in large scale for Criss Angel's double penetration, in which one woman appears to become embedded in the other, and both women have their lower body replaced by identical copies of the other woman's upper body. Frightening and (to the uninitiated) incomprehensible!