How and where do double-terminated crystals form?
Double-terminated crystals can from by crystallizing from a melt. The crystallization nucleus has to float freely in the magma chamber. As long as no other crystals obstruct the growth the crystal will grow in its own characteristic form (euhedral). This happens for example with feldspar crystals. (Example: http://www.erdwissen.ch/wp-content/uploads/2010/12/granit-feldspat.jpg)

If the crystal forms in a fluid cavity it can form double-terminations when it doesn't grow with the c-Axis normal to the wall. Sometimes crystals also grow with their c-Axis parallel to the wall (Example: http://wannenkopfe.strahlen.org/titanite.html). Probably super cooled pegmatitic melts also form free floating double-terminated crystals like tourmaline.

On the smaller scale (microscope and electron microprobe) double terminated crystals are pretty common in metamorphic rocks. Sections cut parallel to the stretching lineation (or the lineation which elongated crystals aligned themselves to) will show many porphyroblastic crystals with double-terminations.