The following is mainly drawn from several articles on the Draft Lottery, including Jeff Dengate's description of the 2005 Lottery for NBA.com and Mike Zarren's explanation of the Lottery's rules and machinations for celtics.com in 2007 as well as the Draft Lottery entry in Wikipedia.
On the night of May 20, just before the Celtics and Pistons tip off, fans of the 14 teams that didn’t make the playoffs will tune in to watch their teams’ fate be decided in a clear plastic machine filled with ping pong balls.
It’s called the NBA Draft Lottery and here’s how it works:
Fourteen ping-pong balls, numbered one to fourteen, are placed in a lottery machine in Conference Room 3A at the NBA TV headquarters in Secaucus, just off Meadowlands Parkway. Two representatives of each of the 14 lottery teams are permitted into the conference room—one to witness the lottery and another who will later sit on the stage in the nearby TV studio. The team reps are usually principal or minority owners, GM's or even players. If a team has traded away its lottery pick, the team that owns the pick will be invited. Reporters who cover the three teams with the best shot at winning the lottery are also invited.
To gain access to conference room 3A, everyone must first surrender all forms of communication with the outside world, no cell phones, no blackberries. A sign on the outside of the entrance offers a stern (Stern?) warning: NO ADMITTANCE AFTER 7:10 P.M.
At the center of the room sits the lottery machine. In the event the machine breaks down, there is a second machine in an adjacent room. In the event both machines break down, there is a power failure or another unforeseeable event, the balls will be drawn manually from a basketball which has been lopped in half.
After a discussion of the rules by the NBA’s general counsel, the team representatives who will sit on stage leave. They won’t know for two hours their teams’ fate. The reporters stay on.
Then the process begins.
There are exactly 1,001 possible four-ball combinations when you have a set of fourteen. Each team in the lottery has been assigned a set number of combinations of any four of the balls, for a total of 1,000 combinations. (The 1,001st combination belongs to no team.)
The number of different combinations assigned to each team depends on that team's record; teams tied at the end of the regular season split evenly the total combinations allotted to their two positions, with one team getting one more combination in the event the total is odd.
For example, in 2007, the Minnesota Timberwolves and the Portland Trail Blazers tied for sixth worst record. The average of the 6th and 7th positions in the lottery was taken, resulting in each team getting 53 combinations (the average of 63 and 43). Should the average number not be an even number, a coin flip is then used to determine which team or teams receive the extra combination(s). The same would hold true if there were a three-way tie for a position.
Then, an independent accountant, witnessed by a representative from each lottery team, draws four balls out of the bin, and whichever team is assigned that combination gets the first pick in the draft. (If it's the 1,001st combination, the balls are replaced and drawn again.) The balls are placed in the machine and spun for 20 seconds prior to the first ball being drawn. The remaining three balls are drawn at 10-second intervals.
Here are the chances of each team of receiving the #1 pick, starting with the team with the worst regular season record:
1. 250 combinations, 25% chance of receiving the #1 pick
2. 199 combinations, 19.9% chance
3. 156 combinations, 15.6% chance
4. 119 combinations, 11.9% chance
5. 88 combinations, 8.8% chance
6. 63 combinations, 6.3% chance
7. 43 combinations, 4.3% chance
8. 28 combinations, 2.8% chance
9. 17 combinations, 1.7% chance
10. 11 combinations, 1.1% chance
11. 8 combinations, 0.8% chance
12. 7 combinations, 0.7% chance
13. 6 combinations, 0.6% chance
14. 5 combinations, 0.5% chance
The Nets finished 10th. So their chances at receiving the #1 pick are 1.1% or about 90-to-1.
After the first pick is determined, the balls are replaced, and the process repeated. If the new combination belongs to the team that already won the first pick, the balls are replaced & drawn again. The next different team whose combination is chosen gets the second pick, and then the whole process is repeated again for the third pick. After those three picks are set, the remaining teams are set to pick in inverse order of record.
The Nets chances of getting one of the two three picks are a little less than 5.%.
The accountants mark down who gets each pick, and place a card bearing each team's logo into an envelope bearing the number of that team's pick. The envelopes are then brought out on stage, where they're opened in front of a live TV audience, at which point we all find out where each team is drafting.
The luckiest team under the current rules, instituted in 1994, was the 2000 New Jersey Nets, who finished with the 7th worst record but won the overall no. 1 pick, choosing Kenyon Martin. That night, Nets’ minority owner Finn Wentworth was in conference room 3A and principal owner Lewis Katz was on stage.
The Bucks and Blazers are next luckiest, having finished with the 6th worst record in 2005 and 2007 respectively, the Bucks taking Andrew Bogut, the Blazers taking Greg Oden. The team with the worst regular season record has won only four of the past 21 lotteries. In the eight lotteries this decade, it’s happened only twice: the 2003 Cavaliers and the 2004 Magic both finished with the worst regular season record and won the lottery. Both were doubly lucky, since they got to pick Lebron James and Dwight Howard. The team with the worst record can do no worse than the fourth pick. That’s also happened twice in the last decade, in 2001 to the Bulls and in 2006 to the Blazers.
The order in the second round is determined solely by regular season record, without regard to the lottery results. So the Nets will pick at #40.