Minecraft 1.4.5, Minecraft 1.4.7, Minecraft 1.5, Snapshot 13w11a, Minecraft 1.7.4, Minecraft 14w04b
In a normal cobblestone generator, placing redstone in the place of where the cobble would normally be generated, obsidian is generated instead.
Today I've looked in the code (no mention of redstone being a special case) and tested around to see that string (with a single hook placed to the south or west) also works.
For a long time I thought this was either a little secret feature or a bug that's been accepted as a feature, so using redstone to not waste lava source blocks was always something I've accepted and used since I knew of this, maybe even up to a year back. For me it was never a problem, except that now with string, it makes it officially a bug. It worries me though, I wouldn't want to lose the ability of making an obsidian generator using redstone, so I hope that'll get put back into as a feature.