Magic sand is ordinary beach sand coated with tiny particles of pure silica, then exposing them to vapors of a silicon compound called trimethylhydroxysilane. The result is a hydrophobic or water-hating sand: when exposed to water, the sand would "stick" to each other rather than to the water, and therefore remain dry.

It's easier to understand after you watch the video: hit play or go to Link [YouTube]. For more info, see: Magic Sand [wiki], Chemistry.org explanation - Thanks Yayo!