I've never actually done this before but my understanding is this:
1. The game is de-compiled to obtain the files the make up the game.
2. The file(s) containing the text for the game are opened in a certain program depending on how to text was compressed into the file.
3. The text is translated from Japanese to English.
4. The file(s) containing the text are injected back into the game, or the translator team provides the raw text file and an injection program in order for the user to use that program to inject the language patch manually. This is done because sometimes translator teams don't like to do it themselves, because that would require giving a download to the full game, which, of course, is illegal.
Nintendo Network ID: Frozen-san