- Just a pixel-by-pixel copy of some image found on the internet, or
- Done by a bot and/or automated tool
(click for full size).
First I created a Minecraft block-color palette for Photoshop to simplify conversion a bit. Simple conversion produced pitiful results. I tried gamma correction (matching Minecraft's white block to image's white), and it was a bit better. The dither gave it that ugly botted look though. Removing the dither, it looked better. But all the outlines were still crooked, and colors were dulled. So I ended up manually merging three palette conversions, done at different gammas, and spent another hour editing it by hand.
After that, it was just a lot of patient block clicking, with only slight changes to the reference. The whole project took about 8 hours. And I think it's totally worth it.