After investigating, it turns out that while the making of chicken nuggets is still disgusting, its not quite as disgusting as we thought.
Mechanically separated chicken—the stuff chicken nuggets and patties are made from—is what you get when you grind an entire chicken through a sieve, soak it in ammonia, and add flavor artificially.
With some prompting from Jason Kottke, we've done some investigating, and it turns out that the post was only partly true and certainly blown out of proportion (and no one is really sure what that photo is of).
According to Snopes, which I regard as the preeminent internet-craziness fact debunking site and (problematically, most likely) consider infallible, here is what is true and not true about mechanically separated chicken:
1. "It's what you get when you grind an entire chicken through a sieve"
Close, but not quite. When a machine processes a whole chicken, there is quite a bit of meat left on the bones. To avoid wasting that meat—and money—the bones are run through a sieve-like device, but only to remove meat and other edible tissue (like tendon) from them. So, yes, there is a sieve, but the end result consists only of meat, not ground up bones or eyeballs.
2. "Soak it in ammonia"
Ammonia has sometimes leaked onto food from cooling systems, causing contamination, but it is not something that food processors can legally add to foods. Lord knows what people are actually doing in their chicken processing plants, but this is not an accepted part of the practice.
3. "Add flavor artificially."
This part is totally true. These little processed chicken scraps may not have the delicious chicken flavor you were hoping for, so processors add flavoring.
4. "The stuff chicken nuggets and patties are made from"
This is also totally true. Also add hot dogs to that list. However, a product must list "mechanically separated chicken" as an ingredient. For the record, McDonald's Chicken Nuggets are all white meat, and not made from MSC.
So, the truth is pretty gross. But not quite as gross as the internet rumor. Below can see a great video (which we've linked to before) of Jamie Oliver showing kids exactly how chicken nuggets are made, and then watching in horror as they gobble up the results: