Methods vary, but most involve some sort of soaking, boiling and a good bath in chlorinated (or light bleach) water followed by a soak in water with Prime to neutralize the bleach. All I ever do is boil the crud out of them over and over until I'm convinced they've leached most anything they could possibly be holding onto. Then I let them cool off and put them into the aquarium.
Make sure you know what species you get. Pines and most conifers are a no-no unless they are very old and weathered, the sap is toxic to fish. Fruit wood is fine and I like hemlock, which is safe even though it's a conifer. Most deciduous trees are okay too, just do the research as you go.
Yes, activated carbon comes in many forms. Easiest way is to buy a refill of it and put it in a mesh bag. Then rinse it a long time to remove the dust and add it to your filter.