I usually muse about what I'd like to happen or see in a game over the course of a week, and jot down a few ideas here and there. Once I have an idea firmly in mind, I'll go through the bother of statting out the monsters and NPC's so I don't waste time digging through books for them. I'd say about a good 60-75% of my game time is spent 'winging it', as I like to use a lot of NPC interaction and banter. Also, once the players starrt formulating ideas about their situation at hand, I listen and take notes, because sometimes what they come up with is better than what I had planned. In fact, one of my now famous taglines is, "It is now!".
Example:
Me, as DM: "You enter the nightclub. It is dark, with violet accent lighting spread throughout. Small, lithe waitresses serve neon-colored drinks out of test tubes as they sashay all over the place. The music is typical of most top-40 dance joints."
Player: "I thought this was more of a goth place."
Me: "It is now!" and I proceed to re-describe the scenery, making adjustments as I go.