Chipping can be defined as a shot with maximum ground time, minimum airtime. It is a versatile shot that can be played around the greens, out of trees or for a penetrating shot under the wind. There is no wrong club to use when chipping. You can use a hybrid or sand wedge. However, there are higher percentage club selections for certain situations using the same technique.
To set up for a chip, realize that you are setting up to putt (conventional style). There are two slight modifications and you are done.
Set up with a narrow, square stance. Move the ball back towards your rear foot. Keep the butt end of the club pointed at your belt buckle and lean your spine forward so that your head is in front of your hands, hands in front of the clubhead.
Leaning forward towards the target should level your shoulders allowing the club to make a more descending blow into the ball. Also, keep your wrists quiet and firm. This eliminates scooping the ball and catching a lot of grass between the face and the ball.
Now simply maintain this stance and use your putting stroke (again no wrists).
Choose the least amount of loft you can get away with. You want to get the ball on the ground as soon as possible so that the ball can roll like a putt. This gives you the best chance of controlling your distance and also allows you to play the break and potentially make more chips.
You can see the photo (below or to the right) shows the difference between how a sand wedge and 8 iron are aimed and played on a green with a bit of right to left slope. Both shots are good but the 8 iron is a higher percentage shot because it requires less precision on the hit.