For me, it starts with an interesting situation, and I drop a mental model of the character into it. It's like running a simulation on the computer. When I've got the plot hammered out, then it's like putting together a jigsaw puzzle, finding the right words to convey the images, and occasionally finding things I hadn't seen in the bare bones image that the simulation provided. The characters only interact with me in Chibi-form in my head, and THEN only usually complain about the trauma I'm inflicting on them...

That's long fics. Smaller things tend to be born from one searing image, and then spun around it like making cotton candy.

You know, this is a fascinating question, thanks!