morten_tor,
All Eclipse is doing for you is generating two makefiles, one for the application and one for the system library, these can be found in the release or debug directory and are called makefile. Eclipse then simply calls make -s ALL as you've identified. I would suggest looking at Chapter 5 of the Nios II Software Developers Handbook which covers some of this material.
The online help also covers this in detail from with the IDE go help->help contents. From the dialogue that pops up click on Nios II IDE Help under the reference tab is a topic Nios II IDE Managed Make Build Environment, this should help.