its a weird balloting system known as preferential voting (some countries use it for their voting) where every member in a category nominates their #1 pick, their #2, etc up to 5 or 6 and then they spreadsheet that shit out to come up with the top 5 and then as you say it goes to the general membership for final voting. The foreign film category is the only one I think which has its own set of weird rules where a committee decides the nominees and there are extra rules on general voting, where you had to have watched ALL of them at special screenings and screeners at home don't count, which means its the category with the fewest votes every year.
Of course its not a vacuum where a bunch of old actors sit on their rocking chairs pondering the year, the members all get sent screeners and there are screening events and parties and they all get tons of letters and emails and schwag-not-schwag and massive full page ads in all the magazines celebs read about each other. The ones who win tend to be the ones with companies that spend a lot of money reminding members why actor X is the most important actor of our generation or why movie Y will make life better for trans gay black cowboys for the next 100 years and how important it is for Hollywood to be seen as the guiding beacon of light in a world filled with hate, racism, and misogny (but not Hollywood of course).
No one walks to talk about the fact that many oscars in the past 2 decades were chosen because the Weinstein brothers essentially horse traded for them, "vote for Y and i'll help make your movie get done".
Vote splitting is a big thing too, bland movies like Green Book end up winning because all the ultra-progressive votes get split between "the gay movie", "the black movie", the "fuck capitalism" movie, etc.