Those within Hollywood who do need to pay attention to how the voting process works (potential nominees, their producers/agents/managers, studio execs, etc), know it is more complicated than that. But, according to Variety et al, very few of them truly understand how it works. Everyone seems to say only those guys at PriceWaterhouseCoopers (yes, PWC does the counting for the Oscars ... surprise!) understand it ... or they say, ask your accountant to explain.
This is what I understand.
The easy part. Now, there are nearly 6,000 Academy members.
Academy refers to AMPAS, or Academy of Motion Picture Arts and Sciences. It is in Beverly Hills.
Who are Academy members? Basically, they get invited if it is agreed they have offered significant contributions to the industry - or more regularly these days, they are automatically invited if they were nominated for/won an Oscar.
UPDATE: Apparently a different system is used for the Original Song nominations. Read explanation here.