I'm using a smoothon rubber mold material called Clearflex 50. If you use mold release, you can pull the rubber parts from a rubber mold. See the product sheet for more info.

http://www.smoothon.com/PDF/Clear%20Flex%2050%20&%2095%20Combo.pdf

As to how to do it, Rob S mentioned the idea in Amersfoort and Hugo suggested it here. I've got a set of transparent button from farnell that I am trying to cast around. I say try because this is just theory at this point.