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It seems to me, like many have mentioned that while you are in gear you are actually engine breaking while you are going "too fast" for the current gearing OR you are idling if the engine is spinning fast enough to push the car forward without stalling.
The actual amount of breaking will depend on your final gear ratio, and will be very minimal in an overdrive situation. With a manual transmission, the lower gears obviously cause higher rpm indicating that inertia is turning the engine over ( so not much fuel is used).
While in neutral (or with the clutch fully pressed), the transmission and the engine are "off-line" and out of the loop. They are not either giving or getting any energy from the momentum of the car. So there is much less friction at play so the car will coast farther.
Here's a couple examples...
While coasting in 6th gear at 70 miles an hour on a flat freeway I get 65-75 MPG on my gauge. the RPM is at about 1500. When in neutral on the same stretch at the same speed my gauge is in the high 90's, and the engine RPM is about 600. The max displayed on my car is 99MPG.
At the other end of the spectrum there are a couple of sections of 25MPH road. I "idle" these sections in 6th gear. Basically, all I have to do is get to about 30MPH (so the engine does not bog down and stall), then take my foot off the accelerator. The car will idle along at 20-23 MPH while getting ~45MPG, and since there is not any big hills the engine can continue to produce enogh power to keep the car moving with out starving itself, and stalling.
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