This strategy has been tested by many people and myself so it absolutely works great! On the down side this strategy only works with mages and priests. A group of a mage and a priest is the ideal way for this strategy to work.

Once mage gets instant arcane explosion then it is off to the races by killing groups of monsters slightly lower level than the mage/priest and be able to kill 10-20 of the mobs at once using AOE spells from the mage and the priest's flash heal spell but can also do it without the flash heal spell to some degree.

Here are the main spots to grind:

lvl 20-22 humaoids in mine in Windshear Crag, Stonetalon Mtns
lvl 24-30 furlbolg camps in Ashenvale
lvl 28-30 humamoids in Azureload mine
lvl 32-35 humanoid farms in Arathi Highlands (Dabryie's Farmstead is GREAT)
lvl 35-36 murlocks in northeastern dustwallow marsh.
lvl 35-39 trolls in northern Stranglethorn Vale.
lvl 36-40 Syndicate camps north of Tarren Mill and into Alterac Mountains (beware casters in some of the camps!).

lvl 44-45 humanoid pirates on the east coast of Tanaris.
lvl 46-48 Rage Scar Yetis in Feralas.
lvl 53-54 undead at Dalson's Tears in Western Plaguelands (great! but make sure you can ward off fear somehow).
lvl 57-60 Ogres in Deadwind pass.

Remember that there are many more great places that this will work (at some cases better) than the spots listed here. The only reason they are not listed is because they haven't been found yet! Here are a few pointers to keep in mind when finding a place to use this strategy.

Monsters that are ranged are tougher to do this strategy on, but not impossible.
Avoid monsters that silence, mana burn, fear, sleep, etc.
Target monsters a few levels lower than your mage for maximum XP yield.

Tips for the Mage
Use frost nova to root monsters so that you can AOE them without getting damaged as much. Also remember that you can combo frost nova with cone of cold for some massive damage if you are frost specced!
If the priest is getting hit you are both dead since his heals will be interrupted. Make sure you move around to keep aggro on all monsters.
Frost nova will also prevent mobs from running when they get low hp.

Mage Build
Pretty much any build will do, just make sure that you have improved arcane explosion. If you go frost make sure to get improved crit % of cone of cold as well as lower the cooldown on frost nova. If you go fire then combustion is nice for that initial bang.

Priest Build
Improved PW:S is a very wise investment. Also improved flash heal (70% chance to not be interrupted) is a good thing to have if you want your mage to be able to survive while you are getting hit, however it is not necessary if your mage is doing his job.

Finally, a mage can do this himself without a priest but it is much less efficient. Typically a mage can only do this to 3-5 monsters at a time maximum because of their low hp and no healing abilities. If you do the math, 5/1 is less than 20/2 so by duoing with a priest you are actually increasing your own profits!