I’m close and you can find out too [via Schneier On Security].
Here’s an idea of how it works:
According to published reports in the Washington Post and elsewhere, the federal government is using an algorithmic software product known as Soundex to search databases for potential terrorists. Developed in 1918, Soundex removes vowels from names and applies numerical values to remaining consonants. Names are matched according to those resulting numerical values.
Remember, if you are on the real no-fly list you can try to get your name off.