You press fork on github. You write some catchy posts. In one way or another you distribute a few million coins while keeping a few million yourself. Now you sell. That's the shitty side of it and it's a little bit more involved but not much. On the more legitimate side of it it's a way to raise public cash for software projects.
Someone said to me recently that ICOs are for software raising money... but isn't bitcoin alone perfect for that? Just creat an address and everyone can donate?
Plus you get much less overhead because you dont need to fork the coin and set up miners and blah blah...
Often founders (used to?) pre-mine (i.e. mine coins before releasing the currency to the public), or set their currency up to give them a given percentage of all mined coins.
Assuming you can create enough hype for your new coin, this can be much more profitable than just taking donations/funding through a BTC wallet.
I'd encourage you to give the last few episodes of the YC podcast a listen, the ones on cryptocurrencies. While there is nothing fundamentally new about the mechanisms, there is a fundamental shift in who you have to trust for the transactions. I can't possibly explain this better in a comment than the podcasts or the great number of posts on the subject.
Ah but donating is not at all what they are doing. The main motive for taking part of an ico is return of investment not altruism. They are early adopters of your ponyous coin in the hope that ponyous coins will be worth 100x in a year and they can all buy lamborghinis. Results will vary.
And for every coin that tries to solve different issues with Bitcoin (or I'd also argue tries to apply the tech to a specific problem using block chain, i.e. smart contracts, storage, scientific research, etc), there's 20+ "me too!" copycat coins. Basically like everything that exists ever (games, movies, music, books, apps, businesses, etc).
