The "Theory" is called resonance. I'm sure you've seen this video before: Tacoma Bridge
Every object have frequencies which they vibrate easiest at. You can think of it as if you shook it at a certain frequency it will be easier than at other frequencies.
An acoustic guitar is designed to vibrate easily at many frequencies(a whole range) i.e., so you can get a louder sound. This is basically resonance at work. When the strings vibrate on an acoustic guitar they move the are around them which goes into the guitar hole and change the pressure in the guitar. The strings are also attached to the neck and bridge which causes the guitar to "flex" which causes the air around the guitar to move too.
Now a guitar has some frequencies that it is better at amplifying than others. When a loud sound is played with those frequencies in it near the guitar it will amplify them much more than other frequencies. Since you have transducer which takes that sound and feeds it back into the guitar(Through the amp's speakers) you have a feedback system. This is called positive feedback because it results in a net gain in amplification.
Notice how your guitar seems to feedback at a certain frequency? This is one of the frequencies that the guitar resonates at. If you play a sound without this frequency in it or much lower than others it will resonant but not as much. Why? Because generally resonances works on an exponential scale(or better a logistics scale). The feedback cycle can grow very quickly then reaches a point where just can't go any higher(the high cannot produce any louder sound).
So, how can one control such feedback? One is to find the resonant peaks of the guitar and EQ them down. This may not be preferable because of the tonal repercussions.
Another way is to change the position of the guitar relative to the speakers. The guitar is 3 dimensional and it's resonating frequencies are actually modes that exist in 3D space. They are not symmetric. Also the frequency may be dampens by the human body or guitar body along it's path to the guitar's cavity.
Changing the amount of acoustic resonance can shift the resonant frequencies or dampen them enough to reduce the feedback. You can do this by adding/removing weight to the guitar or adding material into the cavity of the guitar that alters the shape of the cavity.
The problem is, is that acoustic guitars are designed to amplify pressure waves. Your amp is creating pressure waves and your pickup is picking them both up. The acoustic guitar cavity is basically taking the sound from your amplifier and adding it into the pickup's. This creates a vicious cycle. If you were to draw the way a sound would move through the signal chain you would see that some of it would go into a circle.
Sound out of guitar -> into Amp -> out of Speakers -> (some) Into Guitar's Acoustic Cavity -> Picked up by transducers -> Becomes part of the sound out of the guitar -> Sound out of the guitar
Each time you go through the cycle though you get more and more sound out of the amp since at first you start with no sound from the amp and each time the amp's output gets louder.
Even solid body's can have a lot of feedback. Low amp volume is the only way to ultimately control it(there is a point where no matter what you do you'll get feedback and it will always be positive).
Note though, Amp's can be designed for low feedback. If your amp is a high gain amp then it will have a tendency to feedback more than a low gain one. They can't completely eliminate the problem but an Amp's circuitry can also experience positive feedback and resonate. This can easily compound the problem of acoustical feedback.
No one will be able to offer you a specific solution because it will depend on way to many factors. You are simply going to have to sit down and figure out how to reduce the feedback. For all you know the guy was running his amp very quite and just enough to mic it? Or maybe he did use paper in his guitar? Or maybe his guitar was just not very resonant? The Guitar, Amp, Room, Effects, Body shape, Cloths you were, etc all have an effect on it.