Ruby -p, 6868 57 bytes
-11 bytes by shamelessly stealing the method used by xnor's Python solution.
l=1
gsub(/./){l=l<<7|$&.ord}
$_=?1+(l^l/2).to_s(2)[2..-1]
Original solution:
gsub(/./){'%07b'%$&.ord}
l=p
gsub(/./){b=$&.ord-48;r=l ?l^b:1;l=b;r}