For the actual prizes that are associated with the Year of a Million Dreams (Dream Fastpasses, Dream Ears, Dream Pin Lanyards, the trips, the castle stay, etc...) there is not any rhyme or reason, there is not a way to get "picked" it is completely random...It is very fair, the CM's do not "pick" people.
There is a computer system that is run by Creata (an outside company), it randomly prints out time, place and prize. The head manager of the project gets these, puts them in an envelope and seals the envelope with the Park name, time to open the envelope and the date printed on the outside. The Dream Squad gets the prizes delivered to them in black bags with the envelope zip tied to it, if it is the Dream Fastpass, Dream Ears or the Dream Lanyard. They are able to open the envelope about 30 minutes prior to the actually delivery time of the prize. The letter inside will say something like Issue 100 Dream Ears at 1:30pm at the entrance turnstile at Dumbo. At exactlly 1:30pm (yes they have synchronized watches) they will be at the turnstiles of Dumbo and the next 100 people to go through them will be issued the prize.
If it is a big prize, the night in the castle, a trip around the world, etc it is a little different. They will get the envelope only about 5 minutes before the delivery time and the information will be VERY specific. It will say something like Issue Cinderella Castle stay at Rock N Roller Coaster at 2:23pm to the guest in row 4 left seat. The next car to enter the unload on or after 2:23pm the guest in row 4 left seat is the winner, if there is not someone in that seat at that time, they will send the prize back into the computer to be re-issued at a different location and time.
It is a completely random process and being audited by Ernst & Young (outside company) to make sure that it remains that way.
There is a post a few pages back titled "We hooked a really BIG fish" it tells of an 11 year old that won a trip to Paris simply by sitting on "the right bench at the right time"... Everyone is fair game...no favortism in this one.
The things that you will hear people being "picked" for are Magical Moments, this is not a Prize from the sweepstakes. Magic Moments can be as simple as being give a free ice cream, to being upgraded at the hotel. These are not official prizes from the YoaMD Sweepstakes, Magic Moments are just CM's offering something special to make your stay more fun!
Also keep in mind that the Dream Squad has two roles, the ones issuing the prizes will have on khaki pants, a blue button up shirt and a white vest with the logo on it. They are very elusive and will stay in backstage areas as much as possible, just popping in to issue prizes and then vanishing again. The other role is super greeter, when they are in this role they will have on the khaki pants, blue button up shirt but they will NOT have the vest on. They will be carrying a black messenger bag with the logo on it. They do not have prizes when they are in this role, they are simply mixing and mingling, making sure your having a good stay, answering questions and just being visible for assistance. Many people confuse them with the prize team and think they "almost won" but they did not... the prizes have very specific locations and deliver times, they can not be altered...