I don't remember all the technicalities of it, but I'll try to help...my friend who sells souvenirs in the lobby recommended being there like 4 hours before the show so you are first in line. For a Sunday matinee, we actually got there at 9:30 and were the second people in line. I think the Box Office actually opened at noon and around that time they took the first 20 people in the cancellation line and brought them inside to wait. At around 1, the cancellation tickets started to become available (couriers brought them by etc.) and they sold them as soon as they became available. Honestly, it didn't seem like that long of a wait, watching the lottery was strangely amusing and I was with two friends so we took turns getting food and stuff.
If you really want to see the show, I would recommend the cancellation line over the lottery (I've done both). The cancellation tickets are more expensive, but you have a better chance of actually seeing the show.
"Commit a little mortal sin, its good for the soul"