Elliptical image og leather guitar strap end
A sewing machine uses two lengths of thread to create a seam. The top thread gets pushed through the fabric on a needle and the mechanism hooks the bottom thread around the top thread.

The two threads interlock and pull the fabric layers together.

Hand-crafted - without sewing machines

Source:  http://commons.wikimedia.org/wiki/File:Lockstitch.gif
Saddle Stitch 1 Saddle Stitch 2 Saddle Stitch 3

Saddle Stitch 3

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Stitch Comparison Diagram
Animated image of machine lockstitch Animated image of machine lockstitch
The sewing machine was a wonderful invention. Instead of spending hours with sharps and crewels between your fingers you could just pin the two pieces of fabric together, run them through this gadget and voila: sleeves and body attached - or whatever. Very slick. Bang out a few of those in a day.

Developing a machine powerful enough to punch through heavy leather probably took a bit more engineering, but it works and that's all just fine and hunky-dory.
Trouble with heavy leatherwork is it tends to get heavy use. The leather will take it but the thread wears faster. You can recess the stitches but flexing and abrasion still gets to it. If a stitch breaks, you don't want the whole row coming apart. See my drawing, (above, left), again.

Describing leatherwork as being 'hand-stitched' when it has been made using a hand-controlled sewing machine is perfectly reasonable in modern terms, but what the machine produces is different from saddle-stitch, as you now know, if you didn't before.

November 2013
Updated January 3rd 2014
Library article
Saddle stitch is the classic method of hand-sewing leather.
Each stitch is separately formed, typically producing a saw-tooth pattern.
This is Part 3 of 3 of an article about some of the details.
Close-up of saddle-stitch saw-tooth pattern

Machine stitching comparison and Conclusion

My drawing again, for reference
A sewing machine
forming a lock-stitch.
(Side-view cross-section)