The formation of septarian nodules is very similar to the beginning of the Keokuk geodes. This involves the mineral calcite coming together around a nucleus (usually an ammonite shell) within the mud and debris at the bottom of a shallow sea. Unlike the Keokuks however, conditions changed before the calcite was able to condense into a solid concentrated nodule and sometimes the seashells within the nodule were able to keep their definition. Also, a lot of mud was included in the nodule and this wet mud is the key to the septarians cavity formation... not acid, as is described in the Keokuks cavity formation. There was very little quartz around so the shells lack this enduring mineral.
As the sea retreated and the calcite nodules were buried deeply under erosional material, the host mud turned to shale and some of the wet nodules dried out leaving cracks, similar to the bottom of a dried up pond, within their interiors. The calcite loved the new cavities and crystallized, drawing ever more calcite in to the hollows.
The septarian nodule cannot endure if it is exposed to the surface. It has very little quartz, and calcite and shale does not stand up well to weathering. This makes this lovely rock very rare. You will see the prices on septarians go up as the digging gets more difficult. There is only one place in the world where top class septarians are dug (Orderville, Utah) and it is very expensive to dig as deep as they have to now to find the nice hollows.