Most acquiring editors - the ones who sign the authors as opposed to the copyeditors who check spelling and grammar - know a lot of authors. They've worked with them on other books, met them at conventions, and so on. The community of tie-in authors isn't that large, and many of them are members of the International Association of Media Tie-In Writers (IAMTW) or other professional organizations. Many of them also have agents with whom the editor may have worked before.
It's possible to break into novels as a tie-in writer, but not easy. I managed it, but it was a fluke and I'd already been writing tabletop roleplaying game books for over a decade at the time. Most editors hesitate to give a novel contract to someone who's never written a novel before. Lots of people would love to write novels, but the number of them who manage to finish a novel is a small percentage of that. If the writer has some short stories published and has established a reputation as a trustworthy person who can deliver a good tale on time, some editors may be willing to take a chance on him then, but many editors prefer to stick with the tried and true.
No matter how the editor comes up with a list or writers, he winnows down a list of prospects and approaches the ones that seem the best bets for this project. He discovers if the writer has the time or interest to write a book based on the game. If so, the editor usually asks the writer to pitch a story idea.
A story pitch is often only a page or so, sometimes just a couple paragraphs, that gives a rough idea of the scope, tone, characters, and plot of a possible novel. Some writers hone in on a single idea with the precision of a laser and work it up. Others take the shotgun approach and come up with a lot of short ideas, hoping that one of them hits.
Once the pitches arrive, the editor reads through them to see if any of them seem like a good match for the book. Sometimes this involves consulting with the game's owners to make sure they like the author's ideas too. If there's a solid winner, the editor contacts the author (or the author's agent) to offer a deal.
After the details have been worked out and the contract has been signed, the author gets to work. If he's not familiar with the game in question, he has a lot of research to do. It's terrible to have to play games so you can do your dream job well, but someone has to do it. The author probably did some initial research just to be able to put the pitch together, but to write a full novel requires a bit more depth of experience.
Once the author understands the game inside and out, he sits down to write an outline. This can be a simple story treatment of two to four pages, or it can be a chapter-by-chapter outline of the entire book. The description of any chapter only needs to be a few sentences long, just enough to show what's going to happen at each point.
The author submits the outline for approval, and once he gets that he digs into the actual writing. This is normally done to a strict deadline. Many times, the release of the novel is timed to support the game in the best way possible, and if the book is late this can cause problems for everyone.