The body has a background image (
body.png) which is set to repeat horizontally but not vertically, which means it'll stretch from the left to the right of the browser, but it wont repeat down the page, the header (login box and navigation) is then set to have enough height to fit into the image and push the content down.
This technique isn't the only way to do this and probably isn't the best; the header has to be an exact size for the navigation to level up with the lines (which it doesn't seem to do in the
live demo) and you would have to edit the image whenever you wanted to make changes.
A better way to do this would be to remove all margin and padding from the body, so the header touches the edges of the browser, then style all of the header yourself in css.
It's even possible to create the gradients in most modern browsers with CSS3.