I'll just give you the short version. Channelling involves cutting the floor out of the car, lowering the body down and the re-welding the whole works back together. That way you get a car that looks lower than it actually is. Frame and suspension are still at the same height but the body is lower. Of course, the floor is now higher inside the car and you have to cut down the seats or you bang your head on the roof of the car.
here is the Wikipedia version;
[edit] Channeling
To Channel a car the body is also lowered over the frame by removing the floor & refastening it higher inside the body, causing the body to rest closer to the ground without altering the suspension. The overall effect is to give the car body a more massive appearance. Each automobile would have its own engineering challenges as far as modifying the various components of the chassis. Local laws may prevent making the modifications too extreme, and safety would dictate some restraint. Channeling is also popular amongst hot rod, leadsled and minitruck enthusiasts, though the latter refer to it as a "body drop".
