Having worked on the WTC recovery project, I know a little about this. On that project, we received a waiver on the use of controlled demolitions, and brought in consultants. It wasn’t used much, largely due to concerns regarding the integrity of “the bathtub” (the slurry wall perimeter). As it turns out, there was good reason to worry at the south end and northwest corner.
All of Manhattan (almost all, anyway) is just as densely packed as the WTC complex was; that’s why it’s also illegal to use wrecking balls (you’d be knocking out adjacent buildings on the backswing). According to the demo consultants I regularly gulped coffee with, the job is typically done (as mentioned upthread) by un-building. Typically, you’d start out on the top floor and cut the roof/ceiling out. You cut partially through the supporting walls to weaken them, and pull the walls in with fairly small equipment. Timing is key to make sure you don’t kill the folks 100 stories below you on the street with an uneven pull. Lather, rinse, and repeat.
Incidentally, we used a variety of this in pulling down a few of the remaining shells of buidlings… with varying levels of success. I seem to remember bldg. 5 being particularly resilient.