I'll be concise...
There are both 2-year (PM&S-24 - can sit only for forefoot surgery boards) and 3-year (PM&S-36 - can sit for both forefoot and rearfoot/ankle boards) residencies available. The place that offers the residency decides which of the above 2 they will offer and how many spots (some places offer both a 2-yr and 3-yr spots) and it is usually determined by number of cases/procedures the resident will do.
You have clerkships at various places in your 3rd and 4th years in school in which you will get experience, decide if you like the program if you would like to do a residency there, and in a way it's also an interview process.
The way the system is setup is that if over a couple years, the residency program does not fill up its alloted spots consistently (e.g. a program that has 3 spots only filled 1-2 spots over the last few years), that 3rd spot will dissolve. In order for it to be reinstated, the residency director has to fill out a boatload of paperwork equivalent to opening a whole new residency. That's a hassle.
So, since everything in mother nature works in a oscillatory fashion, there will be a time when there are a lot of grads with not enough residencies to go around because of the above mentioned protocol to residencies. Today, there are enough residencies to cover all the grads, but it is expected that by the graduating classes of 2010-2011, there will not be enough PM&S-36 (3-yr) residencies to go around for all grads, if the number of PM&S-36 residencies does not increase. (read about APMA's 2015 goal of all residencies being 3-years and enough residencies for all grads)