The Scenario

 The magician places a large silver coin into the spectator's hand. He asks the spectator to keep his hand tightly closed.

 "I'm going to try to remove the coin from your hand, without you feeling it, by using a diversion of attention...", explains the magician. Then, he takes a Chinese coin from his pocket. "Look carefully at the Chinese coin..." The magician makes a few flourishes with the Chinese coin.

 “Do you still have the dollar in your hand?”
 - "Yes."
 “This is what we call attention diversion.”

 The magician shows that he is now holding the silver coin. The spectator opens his hand and finds the Chinese coin inside!