The H-1B classification has an annual numerical limit (cap) of 65,000 new statuses/visas each fiscal year. Meaning there is a limit of 65,000 new H-1B visas granted to applicants each year PLUS an additional 20,000 visa for those who have earned advanced degrees (i.e. MA, PhD and the likes).

All applications for the H-1B submitted after the cap is met ARE REJECTED !!

The United States Citizenship and Immigration Services (USCIS) instituted a 'lottery' system for accepting applications because more than 65,000 regular H-1Bs were received on the first possible day of filing. 

Timely filed cases that are not chosen through the LOTTERY SYSTEM are rejected. 

Some categories of employers are exempt from the cap limitations. These include US institutions of higher education, university affiliated nonprofit entries, and nonprofit or governmental research organizations.