"Peanut-Butter Theory" - Attributed to Alan Young that claims that a piece of soft nylon covered with peanut-butter was shoved under Ed's lip and his attempts to dislodged it caused the lip movement.
"Marionette Theory" - Claims that an invisible nylon fish-line tied to the horse halter and the horse's lips was pulled to get the equine conversing.
"Shocking Theory" - Believes that Ed talked because his lips were zapped with short bursts of electricity that irritated his mouth just enough to make his lips move. But, since Lester "Les" Hilton, Ed's trainer was reported to be a very gentle and attentive caretaker, this theory can be put to rest.
Some lesser theories included the lips were animated cartoons; Mister Ed was actually two actors in a horse suit; and Wilbur Post was a ventriloquist and did magical things with his hand.
I still think it was a trick with his halter because I had read that in a book. Also notice that Ed doesn't ever move his tongue as if to lick up the peanut butter.