It is my understanding that the range() function, which is actually an object type in Python 3, generates its contents on the fly, similar to a generator.

This being the case, I would have expected the following line to take an inordinate amount of time because, in order to determine whether 1 quadrillion is in the range, a quadrillion values would have to be generated:

1000000000000000 in range(1000000000000001)

Furthermore: it seems that no matter how many zeroes I add on, the calculation more or less takes the same amount of time (basically instantaneous).

I have also tried things like this, but the calculation is still almost instant:

1000000000000000000000 in range(0,1000000000000000000001,10) # count by tens

If I try to implement my own range function, the result is not so nice!!

def my_crappy_range(N):
    i = 0
    while i < N:
        yield i
        i += 1
    return

What is the range() object doing under the hood that makes it so fast?

Martijn Pieters' answer was chosen for its completeness, but also see abarnert's first answer for a good discussion of what it means for range to be a full-fledged sequence in Python 3, and some information/warning regarding potential inconsistency for __contains__ function optimization across Python implementations. abarnert's other answer goes into some more detail and provides links for those interested in the history behind the optimization in Python 3 (and lack of optimization of xrange in Python 2). Answers by poke and by wim provide the relevant C source code and explanations for those who are interested.