Step 1 : First step 
that USCIS would do as soon as it receives a H1B petition is to label
and identify each of the petitions with a unique identifier. This is the number
that would be used for random selection algorithm.  Once it is labeled, they will group the
overall petitions into two sets, one as masters quota and one as regular quota.

Step 2 :  If there are
more than 20,000 petitions received for masters quota, they would run a
computer generated random selection process, which is called H1B lottery,
across all the masters petitions pool to pick the 20,000 petitions that would meet
the cap for Masters quota for FY 2017.

Step 3 :  All the H1B
petitions filed under master’s quota, that did NOT get selected in the lottery
or random selection are placed or combined with all the pool of petitions
received regular quota H1B petitions.

Step 4 :  If the total
number of petitions in the combined pool are over 65,000 petitions, which is
the cap limit, a computer generated random selection process is run on the pool
to identify the petitions that will qualify for the regular quota cap limit.

Step 5 :  USCIS will
send the list of all selected petitions numbers to the service centers. The
USCIS service centers will proceed with next level H1B Visa processing for
adjudication of the selected petitions.

Step 6 : All the petitions that were not selected in random
selection process or lottery will be returned to their respective parties
either attorneys or the employers directly along with the Fee. If there were
duplicate filings for a same employee by an employer, no fee will be returned.
More info below on this step.

Step 7 : USCIS will inform all the selected petition holders
with their case number for tracking purposes during processing. It will be an
EAC number. Read more on the H1B Visa EAC Numbering Info