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I believe this is called reduction. Essentially, you have created a flavorful liquid, or broth. When you reduce, you remove water from the mixture, and enhance and intensify the flavors that are already present in your broth. You can accomplish the same effect with less water, although 2 cups does evaporate quite quickly.
I will post up other recipes in which I use reduction, including Thomas Keller's butter poached lobster recipe. A fumet, or stock, flavored with lobster shells and herbs is used as the base.
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