Well, I guess I overlooked this statement at the beginning of the 
section:

===
We’ll accomplish this goal with a user factory, which is a convenient 
way to define a user object and insert it into our test database.
===

So calling the factory like this:

@user = Facotory(:user)

does two things:

1) assigns a user to @user

2) inserts the user in the test db

(You never see anything in the test db because the tests roll back 
changes to the db after each test.)

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