The annual Academy Awards gala is one of the most-watched events on the planet, and an incredibly high-stakes evening for film folk.

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The Holy Grail of Hollywood: an Oscar statuette. (Tim Boyle/Getty Images)

Winning an Oscar has a profound effect on the marketability of an actor or director, while the best picture winner inevitably enjoys a mammoth boost in movie rentals and sales.

The nominees and eventual winners are determined by the Academy of Motion Picture Arts and Sciences (AMPAS) — or simply "the academy," as they’re referred to in countless Oscar acceptance speeches.

What exactly is "the academy?"

Formed in 1927, AMPAS is comprised of professional actors, directors, writers, producers and technical workers. Their most exalted task as members is to vote on Oscar nominees and winners, but they also work more generally to promote excellence in filmmaking. To become a member, a person must apply to the organization’s board of governors. Current membership is estimated at about 6,000.

How does the nomination process work?

To qualify for a nomination in any of the feature film categories, a movie has to meet these technical requirements: it must be longer than 40 minutes; it must have its public premiere in a movie theatre during the appropriate calendar year; and it must have premiered in the 35-mm, 70-mm or 24-frame progressive scan format.

To be considered for an Oscar, a producer or distributor must submit an Official Screen Credits form, which contains the production credits for every Oscar category. The academy gathers these and in January mails out a nomination ballot, along with a "Reminder List of Eligible Releases," to each academy voter.

Members must choose five nominees for each award category (except best picture, which features 10 nominees; best original song, which has four; and best animated film and best makeup, which both have three). For most of the categories, only members in that particular field are allowed to vote (i.e. actors for best actor, composers for best score); every member has a say, however, in best picture.

Foreign film nominees are selected from a list of movies submitted by countries (every foreign nation can only submit one per year), and the nominees in both the foreign film and documentary categories are chosen by special screening groups of academy members.

Academy members typically have a couple of weeks to submit their choices for nominees. Once the ballots are in, the accounting firm PriceWaterhouseCoopers tabulates the nominee ballot votes. Soon after, the academy announces the nominees in an early morning news conference in Beverly Hills, Calif.

A week or so later, the academy mails final ballots to all academy voters. Members have two weeks to return the ballots. PriceWaterhouseCoopers again tabulates the votes and seals the results, to be revealed with much to-do on Oscar night.

How beneficial is an Oscar nomination?

In terms of dollars and cents, being included on the best picture short list tends to benefit smaller, lesser-known films more than blockbusters.

To illustrate this point, prior to the 2010 Oscar nominations, the British coming-of-age drama An Education was all but out of theatres, only playing on 75 screens in the U.S. as of Jan. 31. But after racking up three Oscar nominations, the film expanded to 761 screens, the highest number in its entire run. In the six weeks between the nominations and Oscar night, the film earned nearly one quarter of its total U.S. domestic gross.

What are Oscar campaigns all about?

Given the prestige and financial benefit of winning an Oscar, producers make a concerted effort to sway the academy. Gift-giving or bribery are officially forbidden; the only permissible way to influence the academy is to ensure that as many members as possible see your film.

During Oscar season, production companies raise awareness of their films by taking out ads in trade publications like Variety and Hollywood Reporter and in more mainstream media outlets; they also buy space on billboards and on TV and the web. They are also allowed to send voters copies of their films and even organize special private screenings. Harvey Weinstein, one-time head of Miramax Films and the Weinstein Company and responsible for distributing past best picture winners like Shakespeare in Love and The English Patient, is widely regarded as the most tenacious Oscar lobbyist.

Between the cut-off date for Oscar consideration — Dec. 31 — and the Academy Awards gala, the fortunes of an Oscar favourite can change. There are a number of other high-profile awards shows that can influence the academy. They include the Golden Globe Awards (mid-January), the Screen Actors Guild Awards (late January) and the BAFTAs, handed out by the British Academy of Film and Television Arts (mid-February).

A film touted as a best picture lock in December may not have good karma come Oscar night. One recent example was Jason Reitman’s 2009 film Up in the Air, which was the early favourite in the 2010 race, but because of unfavourable award momentum, ended up losing to The Hurt Locker.