From the official website:
Nomination ballots are mailed to the Academy’s active members in late December and are due back to PricewaterhouseCoopers, an international accounting firm, in January.
Regular awards are presented for outstanding individual or collective film achievements in up to 25 categories.
Members from each of the branches vote to determine the nominees in their respective categories – actors nominate actors, film editors nominated film editors, etc.
However within the Animated Feature Film and Foreign Language Film categories, nominations are selected by vote of multi-branch screening committees.
All voting members are eligible to select the Best Picture nominees.
Who are the members?
They are the more than 6,000 artists and professionals who bring the magic of the movies to life.
Here is a short list of individuals from each branch.
Becoming a member
You must be a film artist or craftsperson working in one or more of the art form’s key creative areas. And your work must represent an unusually high level of quality and distinction.
If you are a writer, producer, or director, you should have at least two screen credits on films that reflect the Academy’s highest standards.
If you are an actor, you should have performed scripted roles in at least three such films.
Some branches (including Art Directors, Executives, Public Relations, Visual Effects and others) also expect new members to have worked in their fields for a certain number of years.
Most candidates begin their journey to membership by finding current members to sponsor them.
If you win the support of two or more sponsors in your (prospective) branch, your proposal will be taken up by the appropriate committees. If approved, it would then be given a final evaluation by the Board of Governors.
Also, you will automatically be considered for membership if you were nominated for an Academy Award for the previous year. (Or even better, if you won one.)
Here is a list of the 176 people that got invited to be a member this year (2012).