As has already been suggested, there are two aspects to the use of progressive anagrams (this is actually a misnomer; no anagrams are involved in the technique): the construction of the branching tree itself, and the development of a script to hide the mechanics of what is being done.
Although the technique has a long history, there is no good published info on the construction of branching trees. To do so is not particularly difficult; in fact, an inexpensive computer program called Panagram
is available from the Underground Collective
to do exactly that (a free program by Peter Lipp is also floating around, but Panagram is significantly better). While such programs build branching trees that work, however, they have almost no intelligence that allows them to build trees that are effective in conjunction with a particular script. The latter remains something of an art form.
My own Sign Language
is a much-reviewed monograph on the topic of scripting
for effects of this type. It discusses the three methods used to camouflage the methodology, and illustrates same with a detailed script for the divination of Zodiac signs. I chose this particular effect (popularly known as "What's Your Sign", after a Ray Grismer offering) as there are many versions in print, but almost none of them is particularly strong script-wise. Many of them (T.A. Waters' "Signse", for example) use particularly poor branching trees as well.
I endorse the previous recommendation of Michael Weber's "Crosswords" effect, by the way. The ever-reliable Mr. Weber has devised an extremely effective plot for this type of effect.