They're chosen by the higher staff, and they look at specific things, mainly contributions, activity, behavior and that such. The staff has their own ways of doing stuff. Nick posted a blog about it, if I find it, I'll link you to it.
Edit: Or you can click on the link Nica ninja'd me with.
Edit #2: Click here for Nick's blog, it's a lot more in depth and I like reading it. =D