> I have tried it, and yes: it works. 

Nice circuit :-)

This is how I think it might work:

If both lines are open, both are held high to their appropriate levels by each 
pullup resistor. The FET has a gate-source voltage of ~0V and is isolating the 
drain, which can therefore rise higher than source.

This is the state when both lines are high. Now, each line must be able to pull 
the other line low.

If the 3.3V-side goes low, the gate stays at 3.3V. There is now a positive 
voltage between gate and source, the FET becomes conductive, and pulls the 5V 
line down to the level of the 3.3V-line.

And if the 5V-line drops? Well, that's simply the body diode inside the FET 
becoming conductive, pulling the 3.3V-line low.

Greets,
Kiste

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