Listen closely to some of your favorite retro video game themes. Pay special attention to the overall quality of the sound, the sequence of the parts and the way the music fits the game. You may also want to look at several pieces of music from one game. Some of the better orchestrated game soundtracks had repeating motifs throughout the game.
Visualize a certain type of in-game situation around which to base your music. This will help you decide on the mood of piece.
Come up with a musical idea for your retro video game music. This idea can be anything from a melody to a chord progression. Any instrument can be used to create this initial idea, including a MIDI sequencing or notation program.
Write down your basic idea. You can do this using musical notation or by inputting your idea into a MIDI notation program. Using MIDI software is not only beneficial because of the retro video game sounds it produces, but also because it is very simple to tweak your musical idea using MIDI.
Build upon your original idea. Add a melody to your chord progression or vice versa. From there, add drums or change the instruments playing the melody or chord progression. Try adding harmonies to your melody lines or switching a few chords around. Experimentation at this stage can yield great results.
Loop your retro video game music. All of the popular old video game themes are relatively short sequences of music that repeat endlessly. It is important to keep this in mind when composing your piece, because at some point, you will need to smoothly transition back into an earlier part of your song.