Yep, they have this contest every year, at least for the last... I think three years? This is a much newer contest than PAX itself. I think two years ago it was maybe about 200 entries (IIRC), and last year I am pretty sure it was about 300 entries. Sometimes I get mixed up a bit with the IGF in terms of entry numbers, it's about the same in both contests, pretty much a similar group of games each time. Last year we entered AI War in both contests and did not place in either; with Tidalis I think we have a much more contest-friendly game in terms of both of them.
Given that 10 finalists are picked for PAX 10, and there are only something like 6 slots with various category in the IGF (again, IIRC), the odds of being a finalist at PAX 10 are perhaps a slight bit better. But if the IGF is any judge, the number of entries goes up by 50 to 100 entries every year, for them it's been solid like that since the early 2000s.
Hopefully I'm not feeding you too much misinformation based on my own memory.
Their respective sites have some info on this, or at least on the main penny arcade site I recall they did a post mentioning how many entries they had last year, etc. Anyway, you might well want to enter PAX 10 next year; and depending on your release schedule, etc, there is always the potential for IGF, too -- deadline for submission for that is November.
