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This is a special trick on Halo 2 where a player can throw a grenade without their character physically doing so.
The process is simple. Grab a Sentinel Beam and shoot until it overheats. Then when it is cooling down, throw a Grenade. The grenade will seem to be coming out of you as you cannot see your hand throw it. This trick works with both Frag grenades and Plasma Grenades. It also works if you overheat a plasma pistol or plasma rifle.
Note: This glitch also tends show up during a laggy matchmaking game.