We use a weighted lottery system that privileges teams that finish with lower winning percentages but does not guarantee a certain seed. This is similar to the strategy of the NBA--a strategy designed to prevent intentional "tanking" of a team in order to procure a top seed. For example, if your team finishes 10th by virtue of its won-loss record, you can expect to move up or down a couple slots (sometimes more) in the draft lottery.
The bottom seeds in every league are reserved for teams that make the playoffs. In a typical 24 team league with 6 playoff spots, the reserved bottom seeds translate to picks #18-24 in the next draft. Among the bottom seeds there is a second lottery, but none of them can move up higher than the #18 overall pick.
During the regular season, seed positions are displayed purely on the basis of your winning percentage. This does not reflect a final seeding for the next draft! The weighted lottery isn't run until the close of the regular season. In the final regular sim result set you will be able to see actual seeding for the next draft based on the lottery.
Note: League-Owned teams are throttled somewhat by the commissioner in the draft. They are prevented from accessing the very top players in each pool. This can inflate the real value of your seed. If you own the #5 seed and the four teams above you are League-Owned, you would have, in effect, the #1 seed.