[1] Based on the industrial process of vacuum forming, a rectangular piece of plastic was clamped in a holder and heated over a metal plate.
Then quickly and repeatedly pressing down on a spring-loaded handle on the side of the unit created a vacuum, sucking the plastic down over the mold and shaping it to fit.
Because very hot surfaces were easily accessible to a child (or adult) playing with the toy, it probably could not be sold today due to safety restrictions.
[2] ToyMax (Cedarhurst, NY) produced a similar product called the "VAC-U-FORMER" in the early 1990s with the trademark filed on April 24, 1992.
Both the Mattel and ToyMax products, as well as refill plastic sheets, can easily be found on eBay and Amazon, as well as other vintage toy web sites.