Sean,
I run the Schweitzer Lakedance International Film Festival in Sandpoint, Idaho, and we just finished our third fantastic year. I'm also a filmmaker who has had his short films play in 12 festivals and I have been to probably 30.
The first suggestion I would make is GO to some film festivals. You're in NYC there's some pretty good ones around there. Check out how the screenings go, what kinds of films play, how good the films are, etc. In New York, there is the New York International, and Tribeca, as well as a few others.
Second - Find the right film festival for your film. Some festivals are niche only - comedy, premieres, gay, black, documentary, etc. Your film might be just right for some, and a waste of an entry fee for others.
Third - if this is your first festival experience, and you are making a short film, you'll find that medium size festivals will often offer much more attention and exposure than the big fests... but then again to say your film has played at Sundance, Toronto, or another big fest is quite an achievement.
Finally - a word of caution... there are scams out there. Google "New York International Independent Film and Video Festival scam" and you'll see what I mean. Not all film festivals are created equally. Do your research into film festivals you want to enter. Look at the buzz on the internet. But also remember its a numbers game, not quite like winning the lottery because with most fests, you really do have the ability to help your films chances by making a better film than the rest of the entries. Its a numbers game like this though:
Sundance last year got ~5k short film submissions. They played about 100.
Now off the top thats a 1:50 ratio non-accepted to accepted.
Picture 50 DVD's sitting on a desk. Only one will be chosen for screening.
But lets be realistic. lets say 1/2 of those 50 films really shouldn't have even been entered into Sundance, they have issues that make them maybe not as suitable as the other half.
So now picture 25 DVD's on a desk, they're all "Sundance" type shorts, and only ONE will be chosen.
But lets refine it a bit further and say that only half of those films are really so good that they could play at the preem fest in the world (arguably).
So that means theres now 12 DVD's on the desk. They are all GREAT. They could all play at any festival in the world.
But only ONE will be chosen.
That sort of lets you know:
1) How competitive it is out there.
2) Just how good you need to be to get into Sundance.
3) How its not a personal thing if they don't choose your film.
4) Why its sometimes better to choose festivals with more reasonable submission numbers, like most smaller fests will get. We at Lakedance average a little over 150 short submissions a year, and we play about 40. Thats about a little more than 1:3 ratio. And we do Q&A's, have enthusiastic audiences, VIP rooms, and a beautiful location.