I haven't done this myself, but I think I know the basics of it. There are many places that sell a purfling cutter; basically two knives with a guide that cut the edges of the groove; then you clean out the channel with a small chisel of some sort. After that the already laminated, bent, purfling is glued in and planed/scraped level with the surface of the top or back. Alternative to this would be using a Dremel or something similar to rout the channel, but either way, it's basically the same. I'm not claiming this is accurate, just what I know... Feel free to correct, anyone...
