There are writing contests everywhere. Besides the small ones on blogs for opening lines and flash fiction and such, there are dozens of more formal ones put on by local chapters of writer's groups. These contests usually involve submitting part of your manuscript (15, 25, 50 pages depending on contest) and sometimes a synopsis or query letter. In the first round, your work is evaluated by a panel of judges which typically includes published authors. Then if you final, you move on to another judge--and here's the exciting part--this judge is usually an agent or an editor at a relevant publishing house.
1. You get to see your score sheets and feedback from the judges. So basically a critique, in some cases, by a published author.
2. If you place, you now have something to add to that bio paragraph in your query letter. (And I know that bio paragraph gives a lot of unpublished writers anxiety because--oh crap, what the heck do I put in there?)
3. Impartial feedback. These judges are not your mom, your friends, or even your critique buddies whom you already have a relationship with. The judges don't even know your name when they are looking at the manuscript.
4. There are sometimes small cash prizes if you place and your name may be listed in some of the trade magazines like Romance Writers Report.
5. Did I mention that if you final, your entry usually goes to an agent or acquiring editor? Hello, nurse! No slush pile to sit in--your work in front of someone who can make something happen.
--Winning doesn't guarantee publication. It doesn't even guarantee you'll get a pages request from the agent or editor.--Judging, like anything else, is subjective. I've won some contests, finaled in others, and then didn't place at all in a few with the same exact manuscript.--It costs money--If you have a book that doesn't neatly fit into a category, it can be hard to figure out the right section to enter your manuscript in.