Someone from Lonely Planet Thorn Tree told me:

"Most mochi is made by machine these days - a bit like the mixing action that goes with a bread maker. It used to be (and still is by some people) made by pounding cooked 'mochi rice' which is sticker (and more expensive) than usual rice and shaping into what ever shape suits the purpose.
Mochi can either be served sweet or savoury. It is used in a lot of Japanese sweets. At New Year mochi is commonly eaten in soup."