Rookie Tayshaun Prince came off the bench to spark a second-quarter surge and score 20 points for the Pistons, who became just the seventh team in NBA history to erase a 3-1 deficit and win a playoff series.
In the process, Detroit prevented Orlando from becoming only the third eighth seed to upset the top seed.
"A week ago today, we knew we were going to make history one way or the other," Detroit Coach Rick Carlisle said. "What the guys decided was that it was an opportunity to make perhaps our greatest adversity into our greatest opportunity and they responded."
Richard Hamilton scored 22 points for the Pistons, who advanced to the conference semifinals against the Philadelphia 76ers. Game 1 will be Tuesday night in Detroit.
"We are going from (Tracy) McGrady to (Allen) Iverson, who is another very, very explosive scorer," Billups said.
Detroit and Philadelphia split four regular-season meetings with each team winning once on the other's court.
The Pistons made life miserable for McGrady, who finished with 21 points but made just seven of 24 shots. McGrady, hounded often by the aggressive Prince, had just 13 points through the first three quarters.
"I'm so happy for Tayshaun. Time and time again throughout the season when he has been called upon, he has stepped in and guarded other teams' best players -- Kobe (Bryant), McGrady and even Iverson one time," Billups said. "He is a player who is a rookie but doesn't play like one. He is very poised out there."
"The key tonight was our defense," NBA Defensive Player of the Year Ben Wallace said. "That's Piston basketball. The defensive end is where we make our living."
The Magic have not won a postseason series since advancing to the Eastern Conference finals in 1996. They have been eliminated in the first round in their last five playoff appearances, including three straight with McGrady, the league's leading scorer in the regular season who averaged 33.5 points in the first six games of the series.
McGrady has not advanced past the first round of the playoffs in his six-year career. But when Orlando won three of the first four games, McGrady talked prematurely about reaching the second round.
"This is the worst of all of (the playoff series losses)," McGrady said. "Before, I felt like we had to play almost perfect basketball to have a chance to win. This time, we were up 3-1 and it was right there for us to take. If you want to be a great player in this league, when you lose a series, you have to come back stronger."
While McGrady struggled, Drew Gooden had 20 points and 17 rebounds for the Magic, who shot 42 percent. But it was not nearly enough against the emotionally soaring Pistons.
"It just felt like the longer the series went on, the more their other guys showed their hands. They seemed like they had so many guys," Orlando Coach Doc Rivers said. "To try to put this series on T-Mac would be wrong. I thought he did as much as a great player could do."
But great players ultimately are recognized on how they perform in critical games and Sunday's disappearing act will undoubtedly hurt McGrady's reputation. For McGrady, familiarity may have resulted in his failure.
"They did a great job of finding out what I like to do and going out and executing," McGrady said. "They did a great job of taking us out of our offense and helping out on defense. In Game 7, we got down by so much and then we just tried to force a lot of things and try to make something happen."
The Pistons instead turned McGrady's dream into a nightmare, building a 26-point lead in the third quarter and winning a seventh game of a series for just the second time in franchise history. The first came in the 1990 Eastern Conference finals against the Chicago Bulls.
Detroit won the final three games of the series by an average of 20.3 points. McGrady made just 18 of 52 shots in the last two.
Wallace had seven points, 12 rebounds and five blocks and delivered the knockout blow in the third quarter, when he blocked a shot by Drew Gooden, had a steal and converted a three-point play on the other end to increase the lead to 76-55 with 4:22 left in the period.
"We finally got back to playing the way we're supposed to play," Wallace said.
Detroit shot 55 percent and made 20 of 26 free throws, including all 12 by Billups, who scored a career-high 40 points in Game 6 Friday night in Orlando.
McGrady cut Detroit's advantage to 60-51 on a three-pointer with 10:37 left in the third quarter. But that was the last time Orlando was within double digits.
The Pistons exploded for a 23-6 run that began with a three-pointer by Clifford Robinson. Billups had six points during the run and capped the spurt with a jumper that gave Detroit its biggest lead, 83-57, with 1:31 left in the quarter.
The closest Orlando could come in the fourth quarter was 89-76 on a basket by McGrady. Detroit responded with quick baskets by Prince and Jon Barry.
Rivers took McGrady out with three minutes left and made sure his players saw what they were missing.
"I told them to look around, to look at this crowd, to look at the other bench, look at their celebrating," Rivers said. "We have a future. For the first time I've been here as a coach, it's the first time I can say, without praying that Grant Hill's healthy, that things set up well for us."
Afterwards, Gooden hinted that the series seemed to be lost by the time they took the floor.
"We should have envisioned this and it probably would have helped us get us out of that comfort zone and play basketball and just end this series," Gooden said.