Ah, the memories! I did a spell of that, too, when a few of us launched a (short-lived) school magazine.

We had two options to create the stencil: there was a special machine that used some kind of electrical process (I don't remember details) to scan a printed sheet and "burn" a stencil from it, so you could copy arbitrary originals; or you could cut the stencil directly on a typewriter (with no ribbon), which gave a sharper result -- but you really didn't want to make too many typing errors, there's only so much you can do with stencil correcting fluid.