They first have to win top awards at major festivals. Then the filmmaker is eligible and can submit it for nomination. Then the Academy creates a shortlist. Then the five nominees are announced.
I'm pretty sure that's it in a nutshell. My professor is eligible for an Oscar next year because he took top prize at the Austin Film Festival and won two Black Reel Awards, but he has to go through the application process now.
Im just curious as to which Short Film Film Festival you would need to apply for. There are many festivals, but knowing which one to go for is a tough choice, especially when you dont know anything about them. I only know one located near me, in Toronto, Ont. (CFC) other than that, I dont know any more.
The alternative is to get your film shown in an Academy-recognized theater for (I believe) two consecutive weekends. This potentially costs more, but if you can get people to show up, you could actually break even.
By the way, statistically speaking, very few winners of top festivals actually get nominated for Oscars. For a crystal clear example of this... none of the 5 Live Action Short Film nominees this year were even nominated at other festivals (check IMDb - no awards listings for any of the films except the Oscar nominations/win).
I'm actually purchasing all 5 of the short film nominees on iTunes and watching them tomorrow. I already watched The Confession tonight. Fantastic film.
I've downloaded and watched pretty much every nominated live action short I can, generally their almost 30 minutes. Most are around 23-25 from what I remember.
That's on average, I've seen a couple 15 minute ones, and this years winner "God of Love" was 19 minutes.