As the video below shows, what you're basically doing is tying a string in 5 or 6 loops around the bottle, removing that string with the loops intact and soaking it in acetone (nail polish remover), reapplying the string and setting it on fire, then plunging the bottle into cold water when the fire is almost out.

Make sure you don't breathe the fumes coming from the burning acetone, and turn the bottle as it burns so that the bottle is cut evenly. If you don't have nail polish remover handy, you can also buy pure acetone in most hardware stores in the paint section and it is also commercially marketed as a superglue remover.