The Wizard Riddle (from a co-worker)

[Intercooled T]

There's three men walking through a forest when they're captured by a evil wizard. The wizard take the three men back to his castle with the plan to kill them all. After hearing their pleas to release them he devises a plan to give them a chance to live. The wizard blind folds all three men and places them on a staircase.

There's one man on top of the stairs.
There's another man in the middle of the stairs.
And finally there's a man at the bottom of the stairs.

All three men are facing the same direction(which is the bottom of the staircase) so the top man can see the bottom two, the middle man can see the bottom man, and the bottom man cannot see either of the other two. The wizard explains to them that he's going to place colored hats on their heads and only one of them needs to shout out what color hat is on their own head to set them all free. The hat combinations can either be 2 red hats and 1 white hat, or 2 white hats and 1 red hat. The hats can be arranged in any order.

Before they are unblindfolded the wizard explains to them the rules of which they must follow 100% or he will kill them.

1. The men are not allowed to talk to each other at all.
2. They can not turn around and look at the person behind them.
3. Between the three of them, they have 5 seconds for one of them to shout out the color he is wearing and they have to be 100% positive

So the hats are placed on the heads of each man and the wizard takes off the blindfolds and begins to count.

1....

2....

3....

3 seconds in, the middle man yells out what color hat he is wearing and he's 100% correct. How did he know?