I've been a judge, an entrant, out at the shortlisting stage, a finalist and a winner.
The judges are looking for a song with a definite Lincolnshire theme first of all, then obviously their personal likes and dislikes come into play. They use a voting system to decide on the winner and it can take a very long time to thrash out the final details!
I have to say that my experience has been that it really is a non-competitive event for everyone who reaches the final. Finals night is most enjoyable for the participants and the audience alike.

BTW there hasn't been a competition for the last two years since the BBC banned competitions. (So why is Strictly Come Boring still on TV?)