Have you ever wondered how domain hoarders get all those great domains? They may have got lucky on some, but the majority of their domains are registered after the domain drops (when it is not renewed). To find these domains you need to have the right tools. Just by chance I discovered http://www.dropscout.com/ which allows you to browse dropping dictionary domains, domains with PR, domains that are aged and three, four and five letter domains.
Some of the domains that drop daily are worth thousands of dollars and you can sometimes pick them up for as little as $60-100. Others you will have competition on, but still will be able to get them for pennies compared to what they are worth.
If you put in a back order request on all three of the above sites you will 99% of time be able to get the domain. Once one of the back order sites gets the domain, then you will need to either bid on the domain (if there are other people that had it back ordered also) or you will get it for the listed back order price (on average $60).