hes probably using cigarette smoke, took a puff, went down to the bottom, blew an O then, another one, then blew out with his tongue/throat moving the force of the water to push the first bubble through the second FUCK! i dunno!
Blowing bubble rings under water is no problem. In fact, I think it's easier than blowing smoke rings. Just lay flat, and make the same motions you do with smoke rings. Anyway, I have NO idea how he got the rings to go in and out of one another like that. Maybe it was David Blaine.