This came up in conversation Sunday and I always forget how it works. According to the Academy's site:
"Members from each of the branches vote to determine the nominees in their respective categories – actors nominate actors, film editors nominated film editors, etc. However within the Animated Feature Film and Foreign Language Film categories, nominations are selected by vote of multi-branch screening committees. All voting members are eligible to select the Best Picture nominees."
"The Academy’s entire active membership is eligible to select Oscar winners in all categories, although in five – Animated Short Film, Live Action Short Film, Documentary Feature, Documentary Short Subject, and Foreign Language Film – members can vote only after attesting they have seen all of the nominated films in those categories."
So the nominations are done by branch but the voting lets the entire academy (over 6,000 members) vote for all the awards.
Update: Vanity Fair explains Preferential Voting: Good for the Oscars, Good for Democracy: "The Academy grabbed our attention this year by expanding the best-picture nominees to an all-inclusive field of 10. But amid all the blog-iation about whether or not this devalues Oscar, no one seemed to notice that the Academy also switched to a preferential voting system for the best-picture category. "
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