They select the winner of the suite the same as all other prizes. It is completely random.
Ex:
The Dream Squad cast members are told about 30 minutes before hand, "You need to be at the exit of Buzz Lightyear at 9:30am." They do not know at that point what they are giving away. At 9:30am they are told, "Starting at 9:34am, the 3rd person with a hat to exit the ride wins Fantasmic Priority Seating."
9:34am hits. They watch and count. And BINGO - WINNER!
Some prizes are just for that person and their party, others (like FastPasses) are given out to many at the given place and time. My understanding is if the prize is valued at more than a certain amount they will ask you questions re: whether you work for Disney or related companies, etc....
I have never won - or even been close to Dream lightning, but have asked Dream Squad CMS how it works. The above is what I was told.
- Dreams