Field Label within field

I'm probably missing something here but how do I create a form where the field labels are within the field. So when a user clicks within this field such as "email" it allows them to input accordingly and automatically removing the field label.
An example can be seen on the first slider of this theme where the labels for "Email" "First Name" and "Last Name" are within the field: http://themeforest.net/item/nexus-responsive-business-wordpress-theme/full_screen_preview/2572585

Cheers

Cool, will have a go with the work arounds and I'm sure this will be on your to do list as it's a great space saver for forms working in a responsive design.