Chip were integral to the Midday Meal Mayhem taking place in Meridian during the quest Taste the Rainbow, because the remnants of the salad portion of the feast that Heidrun was preparing was meant to become Chip's new body for reincarnation. Their old body was frail and withering, and their spirit wanted to inhabit a new one, but he wasn't ready to leave his friends and family behind just yet. Olera was looking after them, in the meantime.
Chip was created by Heidrun and her mother, together with a Unknown named Olera the Nourishing. Heidrun, Olera and Chip see other as half-siblings.