The terminal velocity is much higher in this case because the skydiver is assuming a position that minimizes drag and the air is much less dense at the altitudes in question. Additionally, the lower temperature reduces the speed of sound in a smaller but still significant degree.

The terminal velocity in the stratosphere is significantly higher than at sea level, and the speed of sound is lower, at around 670 mph. Joeseph Kittingers' record was 614 mph, which is not that far off the sound barrier.

Pilots have ejected out at Mach 3 from a SR-71 http://www.alexisparkinn.com/sr-71_break-up.htm

In that accident, the pilot ejected without major injury, but the co-pilot was killed.

Terminal velocity depends on the drag/friction from the air, at higher altitudes the air is thinner. So less drag and higher terminal velocity.

The current world record is ~600 mph. http://en.wikipedia.org/wiki/Terminal_velocity#Examples

The air's much thinner up there (99% of the atmosphere is below 20 miles up: http://www.albany.edu/faculty/rgk/atm101/structur.htm). Also important -- the 120 mph seems to be in a spreadeagle position.

In addition to the reduced air density at altitude (as others have mentioned), body position, weight, and clothing also have a lot to do with terminal velocity. A light person wearing baggy clothes in a belly-down position might fall at only 90 mph, whereas a heavy person wearing skin-tight clothes in a head-down position could fall at 170 mph. (speeds given at lower altitudes, close to the ground)

My thoughts exactly...I'm sure he'll be carrying extra weight but I still don't see how this is possible given a certain terminal velocity, like you said.

*Edit...wikipedia says current world record is 614 mph set by Joseph Kittinger. He used the head down method in high altitude, less dense air. That's still not supersonic though.