These days Mojang provides obfuscation maps, so you can work with proper class and method names (though no parameter or local variable names). There's also been a lot of effort been put into the tooling. Nowadays there exists Gradle plugins that will download the game jar, decompile it and deobfuscate it using the official mappings. You develop against the deobfuscated code, then the plugin will turn the unobfuscated names back into their obfuscated versions when you compile.

There's also been technology developed that lets you easily modify specific parts of a method in the game, so you can e.g. insert calls to your own functions at runtime.[1] This saves from you having to modify the game jar itself.

[1]: https://github.com/SpongePowered/Mixin

I remember having to unpack the jar but I don't remember the function names being obfuscated or anything like that. Then again, this was a while ago.