I just found this in a Yahoo! search, I thought I would share my findings on this topic.
I am a hyper miler. For those of you that aren't familiar with the term, basically I put conscious effort into maximizing the fuel efficiency of my car at all times, which is really only fruitful with a manual transmission. Basically, put quite simply, the cornerstone of raising your fuel efficiency is to know, understand and implement the fact that a running engine in a stationary car is getting zero MPG, and a moving car with the engine shut off is theoretically getting infinite MPG, as you are simply raising the miles driven, and not the fuel used.
What I have experimented with, and have found, is that in a modern fuel injected car, your engine will not inject fuel if the throttle is closed(technically nine degrees open according to my Scangauge), so engine braking down a hill is getting you the same MPG as you will by coasting with the engine turned off. I have done a test on a very steep hill in my city, and the car does indeed gain more speed going down the hill in neutral than going down in any gear without touching the throttle. In fact it makes a difference of almost 10 MPH at the bottom of the hill, starting at the top at the same exact speed on back to back attempts. Also, you should be able to feel actual torque being made by the engine once it gets low enough to where the computer tells the injectors to start injecting again, which is pretty close to 1000 rpms. You will feel the car kind of lurch forward. You can also achieve the idle roll that automatic cars have. If you are on even ground, your engine will make enough horsepower at idle to keep the car moving forward; in first gear, it will not stall if you simply keep coasting.
Not only do hyper milers utilize this not-so commonly known function of modern cars, but also professional drivers do on road coarses, by way of heel-and-toe driving(operating the clutch with left foot, braking with right toes, and applying throttle with right heel during downshifting entering turns). Also, driving a manual car is beneficial for driving in snow. As I almost found out the hard way once, it does nothing on ice, but engine braking on snow that is deep enough to give some rolling resistance is so effective, that I have even stalled my engine by downshifting in snow, as the engine/wheels simply stop spinning initially if I let the clutch out quickly.
I would like to think that, bringing physics into the mix, there are a few different reasons for this, with pretty much all of them being listed already. The compression of simple air should theoretically impede the engine from spinning, and cause it to slow down, because there is no combustion to make the power stroke any more pressurized than the compression stroke. So, the variable here is the friction. I would think that even if you removed the valves from the engine, the engine would still slow down as fast, due to the friction of the pistons, rings and walls. You just wouldn't have the compression and power strokes canceling each other out.