Orchidectomy is the operation you are referring to - the surgical removal of the testes.

The majority of male hormones are made by the testicles. By having the orchidectomy as early as possible ( within medical and psychological limits ) the body is prevented from making too much testosterone and the patient has a better chance of being 'feminized' ie the lack of male sexual characteristics and body shape ( Adams apple development is stunted or stopped, broad shoulders stopped or limited, deep voice stopped etc )

The penis doesn't make the hormones and is left for later operations :(

There are numerous websites which go through the entire reassignment process, many with graphic images...I will link these in the source for further reading
Source(s):
http://www.transsexual.org/
http://www.secondtype.com/orchidectomy.htm
http://merck.com/mmhe/print/sec07/ch104/ch104b.html

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