Are these done by grabbing the chip data and converting it to MIDI?
I know that for the ones I used to do, I did it by hand by hearing each channel and notating it accordingly.
Yes, they start with the chip data (spc files).
I begin with spc2midi, which was never finished, and is in Japanese (v0.023, if that tells you anything about completeness). But it attempts to convert the spc data to corresponding midi data. It works fairly well, but they never finished the percussion conversion, so all percussion is a mess. Pitch values are often incorrect for an entire instrument (SNES does not store the set pitch value, only pitch relative to the sample used, so it runs I believe an FFT on the audio to try to guess the pitch), plus each game/audio engine seems to provide some unique quirks that need to be worked around with the generated files. Yet I find in general it still provides a more "true" rendition than the only other utility I have found that does this, there's just a LOT of work that goes in both before and after the conversion.
If you are curious about the whole process, a I have a step-by-step breakdown located at
https://drive.google.com/drive/folders/1op35g2ALiWenpXUNndyuHikq6ZlfmQuG?usp=sharingunder the file SNES MIDI Remaster Project xxxx-xx-xx.docx