I think part of it is that when he's "on" and focused, Sherlock is really, really, really good at reading people. I just watched a Season Four episode where Morland tells Sherlock than an assassin who tried to killed him and did kill the woman he was dating had been "dealt with." Sherlock responded with "Well, you're lying, so I'll just have to investigate and find out the truth myself." There wasn't anything obviously off when Morland said what he said, but Sherlock detected the lie anyway.
Some of this show is scripted with the audience in mind, but some it of is just the occasional "detective superpowerz." I think the bit with Michael was one of them.