like, you just press the notes according to the melody

just memorized them?
or how do you know what notes to press usually?
like, given music theory, why do you decide one chord is better than the other ones?

Word you seek for is "composing music".

Music is like dance dance revolution for the brain. Easy difficulty is just "dunts dunts dunts dunts dunts", without any melody whatsoever. A bit higher level is some pattern recognition. It shouldn't be completely chaotic and unpredictable, there is no way you can memorize that, but if it's too easy to remember it is boring as well.

It's hard to explain, I sort of see them as shapes on the fretboard or keyboard I'm tracing out with my fingers. Like a G chord on guitar I kind of see as the flag for Antigua & Barbuda, which you can move around the neck depending on the key the song is in. You get used to knowing which notes will work together and which don't, but that's part of the fun. It's better to play a wrong note at the right time than the right note at the wrong time, and you can play other notes around it to make it work

Sometimes it's memorised, certain songs I play I'm remember like "okay, up to the 6th fret here at the chorus then that little flippy thing at the 3rd" rather than remembering which notes to play

>why do you decide one chord is better than the other ones?

Depends on the feeling you want to bring to the song. Music is all about creating and releasing tension, and you can create different kinds of tension with different gaps between the chords