Nope. You make them up on the spot. You get yourself ready by educating yourself about chords and scales and by developing your ear etc but, fundamentally, it is about hitting the motherlode on the day. Most of use us achieve that about twice a year. The best guys about 4 times
Have had a listen and it is a great performance, Bill (nice phrasing and a nice sound).
One question (nothing to do with the video). You call it a transcription in the title of the thread. Have you actually transcribed it as in written it down? If not, I would call it a rendition not a transcription. Either way, good work.