An extensive explaination on multicast can be found at Firewall.cx. A long excerpt of an even longer article:
A multicast is similar to a broadcast in the sense that its target is a number of machines on a network, but not all. Where a broadcast is directed to all hosts on the network, a multicast is directed to a group of hosts. The hosts can choose whether they wish to participate in the multicast group [..]
As you are aware, each host on an Ethernet network has a unique MAC address, so here's the million dollar question: How do you talk to a group of hosts (our multicast group), where each host has a different MAC address, and at the same time ensure that the other hosts, which are not part of the multicast group, don't process the information?
Hardware/Ethernet Multicasting [..] When the network card picks up a packet which has a destination MAC that matches any of the multicast MAC addresses, it will pass it to the upper layers for further processing. [..] Ethernet uses the low-order bit of the high-order octet to distinguish conventional unicast addresses from multicast addresses. A unicast would have this bit set to ZERO (0), whereas a multicast would be set to ONE (1).
IP Multicast [..] With IP multicasting the hardware multicasting MAC address is mapped to an IP Address. Once Layer 2 (Datalink) picks the multicast packet from the network (because it recognises it, as the destination MAC address is a multicast) it will strip the MAC addresses off and send the rest to the above layer, which is the Network Layer. At that point, the Network Layer needs to be able to understand it's dealing with a multicast, so the IP address is set in a way that allows the computer to see it as a multicast datagram.