We have a post here
that explains the program in some detail.
We look at many factors, which include performance on the editing test, contributor rank, writing ability (reviews, blogs, etc.), community involvement, relevant writing/editing experience, and the application request itself.
Currently rotations occur about every 3 months, and you can submit an application and take the test at any time before the next editors are selected and the next round begins. The applications remain on file until the actual rotation is done, and if you aren't approved, you can reapply.
I hope that helps!