Murphy's sign strongly indicates cholecystitis. However, the absence of Murphy's sign does not rule out cholescytistis (1). You can do this maneuver by having the patient take a deep breath in to push the diaphragm downward as you push your fingers up the lower costal margin in the midclavicular line trying to go below the liver. If patient stops breathing, it is positive, meaning the patient may have cholecystitis (2). Must confirm with lab and imaging.
Why it works: Recall the location of the gallbladder: under the liver @ the midclavicular line. Since inflamed gallbladder (cholescystitis) causes gallbladder tenderness, the gallbladder being sandwiched between the downward pressure produced by the diaphragm and the hand pushing up, this maneuver produces pain and patient will stop breathing in to relieve pressure being pushed down on the poor gallbladder!

See the anatomical position of gallbladder in relation to the costal margin and the liver:

Sources:
1: http://emedicine.medscape.com/article/171886-clinical#b3
2: http://www.turner-white.com/pdf/hp_nov00_murphy.pdf
3: gallbladder image with relation to skeleton, liver & other anatomical regions (highly accurate!): http://www.med.umich.edu/lrc/coursepages/m1/anatomy2010/html/clinicalcases/cholelithiasis/cholelithiasis.html