I don't know specifically for the Nexus S, but as a manufacturer you can buy flash-chips that have a mmc interface, so that they look like an SD-card to the mic

I don't know specifically for the Nexus S, but as a manufacturer you can buy flash-chips that have a mmc interface, so that they look like an SD-card to the microprocessor but can be soldered like a "usual" chip. E.g. look for SanDisk iNAND.