Making Ed talk.
I've read the other theories about how Ed was made to "talk", and the fellow that mentioned the string is correct. There is a Mr. Ed compilation video called "Barnyard Favorites", which contains eight episodes:
1) "The First Meeting"
2) "Ed, The Songwriter"
3) "Psychoanalyst Show"
4) "Wilbur Sells Ed"
5) "The Horsetronaut"
6) "Ed's Ancestors"
7) "Mister Ed's Blues"
8) "Zsa Zsa"
In each of these episodes a wire, or thread, is CLEARLY seen hanging down from Ed's mouth on the off-camera side. In wider shots the wire is seen going between Ed's forelegs, and in one full-body shot in Ed's stall, the wire continues across the floor. The wire is clearly seen being jiggled in time with the mouth movements, AND it even makes a corresponding indentation on Ed's chest, again in time with the mouth movements. It is as clear as can be on this particular DVD. The notion of using peanut butter, although a good theory, would not produce the CONTROLLED and IN-SYNC movement to give the illusion of talking. I don't believe there is any kind of electroshock involved, it is merely an "irritation", so to speak, which made this particular horse respond in this manner, and in Hollywood terms, this became a useable commodity. Keep in mind, in the 1950's, Hollywood was commonly using trip wires to get horses to fall in Westerns when the riders or their mounts were "shot".