You inspired me to crank up the goole-ator, from Schwab (the decks):

"Where do the shares come from?

The shares used for short selling are supplied from various sources. Many times they are supplied internally, borrowed from long positions held in other Schwab clients' margin accounts. In the margin agreement, as collateral for existing margin debit balances, clients agree to lend positions held in their margin accounts to Schwab for the purpose of loaning to other market participants for short selling. Typically, Schwab can borrow stock worth up to 140% of the debit balance amount from a margin account. Schwab cannot borrow securities that are paid for in full and settled.

If shares aren't available internally, Schwab's Securities Lending Department can seek shares outside the firm. Such loans may often incur an interest fee, which is charged to the borrowing client each day the shares are borrowed. For more information on securing shares from outside of Schwab, clients can contact the Securities Lending Department at 800-355-2448."

I suspected that this was a margin account sort of thing (but not limited to that). I've never traded on margin but all my holdings sit in a margin account because my broker likes it there and I don't want to debate them on it.