Last updated October 17, 2012.
Obtaining the translation file
Localize.drupal.org manages all translations in a database, but it is possible to export and work on translations offline, importing your back in the system later. The localization server exports GNU Gettext files for end user downloads, which are available from ftp.drupal.org, and can be browsed on http://localize.drupal.org. These contain all approved translations up to when the file was generated (and last checked for being up to date). If there was no activity in an area, a certain file can be up to date for months, but once activity picks up the file can become outdated. The automated file export process currently (as of November 2010) ensures that no file is older than one week.
If there was little or no activity on the translation in the past week, you can obtain the .po file directly from the downloads on localize.drupal.org. However, if there is active work going on, contributors are advised to be most up to date, so it is better to use the web based on demand export functionality at your translation team. You can export Gettext .po files for projects and even specific releases to work with.
Editing translation files
Gettext translation files (.po files) are simple text files with a certain format. You can use either a plain text editor, or a translation editor to work with them. If you use a plain text editor, make sure you understand the format and do not break the required format elements when doing your translations.
Contributing back to the community
When you have finished, contribute the translation back to localize.drupal.org by importing the file on the translation team user interface. Translations will either be attributed to you or "Multiple contributors" depending on which option you choose. "Multiple contributors" is a special account you can use if multiple people worked on the translations being imported and singling out one contributor for attribution would not be correct.