Yes. You plan out who's going to sing/play what. Then one starts it by recording their part. Then the other records their part, usually while listening to the other's part in headphones so that they can keep the same timing. So there is a lot of communication and trading rough draft files throughout the process.
Then we edit it together using software such as multiquence or windows movie maker. Once you get the hang of it, it's a lot of fun. My collabs with deach and adellethegreat for the UCB channel were so fun to put together.