How are new words added to the Chinese language?
For English technical term that does not yet have a translation in Chinese, maybe the first translation that got popular would be accepted.

The translation is done by the person who need to use the translation. Sometimes the original English term or explanation with be also noted before the term is generally accepted. Terms are usually translated by the meaning of the word if possible.

For Internet, in the translation process, the "net" part is translated into "网", and the "inter" part into "因特" (by sound). There is also another translation "互联网" in which no part is translated by sound.

There may be various translations for one term. So there is an official department (China National Committee for Terms in Sciences and Technologies) that will pick one (or make up one) as the official translation. But even the official translation may vary depending on the research area. Take "Internet" as an example, the committee gives the following translation in different areas:

术语        中/英文名     学科            子学科
Internet    因特网      计算机科学技术   网络与数据通信
internet    互联网      通信科技       通信网络
Internet    因特网      通信科技       通信网络
Internet    因特网      资源科技       资源信息学
internet    互联网[络]  计算机科学技术  计算机总论 


And I think this kind of official translation is only recommended, but not mandatory.