It does this in a very naieve way, BTW, that is only valid if the input text is in the code page whose characters 0x80 - 0xFF correspond to Unicode code points U+0080 to U+00FF, which is to say not many of them.

And Perl is exactly this naive as well. You can get this exact same result without writing any bit-twiddling Perl code by instead convincing Perl to promote the string to UTF-8, and then storing the resulting bytes into a Perl byte string (or by just turning off the "is UTF-8" bit on that Perl scalar). For example:

#!/usr/bin/perl -w
use strict;

require utf8;

my $s= pack "C*", 1..255;   # Byte string to convert

my $u= pack "U*", 1..255;   # UTF-8 string
my $e= substr($u,0,0);      # Empty UTF-8 string

my $r= $s;                  # Convert using regex
$r =~ s{
    ([^\0-\x7F])
}{
    my $o= ord($1);
    sprintf
        "%c%c",
        0xc0 | ( $o >> 6 ),
        0x80 | ( $o & 0x3f );
}gex;

my $i= $s.$e;               # Convert by implicit upgrade to UTF-8

my $f= $s;                  # Upgrade via utf8.pm function
utf8::upgrade( $f );

my $b= $s;                  # Upgrade then mark as bytes
utf8::encode( $b );

if(  $r eq $b  ) {
    print "The regex and utf8::encode() match.\n";
}
if(  $u eq $i  &&  $i eq $f  ) {
    print "The 3 Unicode strings match.\n";
}
if(  join(" ",unpack"C*",$r) eq join(" ",unpack"C*",$i)  ) {
    print "The byte- and unicode-strings have the same bytes.\n";
}
if(  $r ne $i  ) {
    print "The byte- and unicode-strings are not equal.\n";
}
print '$s contains ', length($s), " bytes.\n";
print '$i contains ', length($i), " characters.\n";
print '$r contains ', length($r), " bytes.\n";
[download]

Which produces:

The regex and utf8::encode() match.
The 3 Unicode strings match.
The byte- and unicode-strings have the same bytes.
The byte- and unicode-strings are not equal.
$s contains 255 bytes.
$i contains 255 characters.
$r contains 383 bytes.
[download]

The regex is different in that it doesn't mollest null bytes. If you change "1..255" to "0..255" in the above code, you'll see that when Perl (v5.8.7 on Win32, anyway) converts a byte string to Unicode, it just unceremoniously stops at any bytes of value 0.