From Chiip-Wiki

Installing the firmware

Now place the modchip into the IC socket of your programmer, and connect the programmer to your PC's parallel port.

You have to do this every time you want to update Chiip (at least as long as no update-via-DVD-feature is available)

We're now going to install the firmware. To do this, you'll first need to download and install a program that can upload software to the ATmega8 using a SP12 programmer). I will explain doing this using a software called AVRdude, but there are other programs that work just fine. For Windows system, the tiny tool TwinAVR might be a good solution, but I never tried it.

If you're not using AVRdude, here's what you need to do:

• Upload the firmware file (.hex) to the ATmega8's flash memory
• Set the low fuse byte to value 0xE3 so the chip will use an internal clock of 4 Mhz. The high fuse byte should be left untouched.

But first of all, download the Chiip firmware:

Download Chiip firmware, v1.0 beta 5 - date 2007/03/08

You are not allowed to sell chips that use this firmware or a modified version of it, at least not without my permission. Downloading/using Chiip may be illegal in the country you live in, so only download if it's allowed in your country!

Uploading the firmware and setting the correct fuse byte with avrdude is done with this shell command:

 avrdude -p m8 -c sp12 -U flash:w:chiip-v1_0_beta5-atmega8.hex -U lfuse:w:0xE3:m -v

Check that the program says that is was successful; if it doesn't, you probably made an error while building the programmer.

That's it!