Z-index switching is a way to make each marker reachable on a crowded map. It is one of the simpliest solutions to the eternal markers-too-close-together problem. The marker that is clicked and the info window was read, is thrown behind the others.
The technique was first published in Dec 2006. The code of the original test page was once again so messy that not very many people have applied the idea. Now it is written as a simple to use GMap2 method createZMarker(). We need to know the status of infowindow, that is why it is a GMap2 method.
I haven't been promoting the technique very actively because it was based on an undocumented option of GMarker. The ZIndexProcess option has been documented for a few months now but still the documentation doesn't tell the full truth. The ZIndexProcess function is documented to be called when marker is addOverlayed and when marker's infowindow is opened. Yes, that happens but the function is called also when the infowindow is closed. That is the most valuable feature but still undocumented and maybe a bug.
Whether the infowindow is opening or closing is determined by status of GMap2.getInfoWindow().isHidden(). If the timing of that flag changes, the z-index swap starts behaving wrong way. Live page using this method should be locked to a certain api version and tested with new version always before updating. That is actually a good practice anyway.
There have been some discussion about new documented way to control z-index. If we get it, we could control z-index also by mouseover. Go and star the request if you find it useful.
Marker icon color change is independent of z-index process but it is built in createZMarker(). I find it an important feature for the journey towards better UI. It makes co-operation between sidebar and markers more efficient.
The marker icons are created by Google Charts API using MapIconMaker script. The markers are slightly transparent which looks good but harms color contrast in very crowded places.