How does that kiss actually work?

Don't know HOW it works, but I think he somehow erased everything from the previous weeks from her mind. The Niagra Falls assignment, finding out Clark was Supes, Zod and his crew... everything from that period of time was taken away.

I assume that's what happened because after Clark leaves, she asks her co-worker "What's going on in the world?" She seems completely unaware of the super-battle and all the destruction it caused.

its a retarded plot device though of at the last sec because they diddnt know what to do

I'm thinking a bit of making her forget about discovering who Superman really was and all the activities after that and giving an alternate memory to her regarding the criminals that were released from the Phantom Zone.

wipes out everything from her finding out he's Sups to the day they are in.