Anyone have any detailed pictures of the side air bags? I can't see how they work from the front seats, as the seat covers are sewn. I thought the air bags deployed out of the door pillars but others say they come out of the front seats, I just can't see it.

 

They come out of the seat side bolsters, breaking the stitching. There are also air bags that deploy from the "A" piller and down from just above the side windows.

 

How can they break the stitching and yet still hold up to normal use? Is it some kind of special break away stitch?

 

Yes, it's "breakaway" stitching. It doesn't usually take a lot of strain as it's the stitched row at the back of the seat that usually breaks away, and normal use doesn't apply much force there. If you order aftermarket leather, you have to specify this as well.
The airbags in the seat side bolsters is very common. My anti-Prius (see below) has it as well (with leather seats). You'd think it would be much more expensive to repair after an accident due to having to repair the seat covers, but it's a minor expense compared to the damage that is incurred from a side impact strong enough to trigger those airbags. That usually results in a write off, as it bends the body.