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In this guide I will explain to you how masterlooting is done in Lemmings! :)
Please make sure to also read Lleu's excellent post about efficient masterlooting
(In general, we will ask officers to handle masterlooting to make sure the people involved are familiar with the current loot policy and can be held responsible when something happens. If no officer is present to help the raidleader, it is up to the raidleader to ask someone to help out. So while this post is mostly to inform those officers less familiar with this part of the game, it might be interesting for others too :) )
1. Download and install the looting addon LootHog , and the addon Classloot. Loothog tracks all rolls done for you. Classloot helps you determine which classes have priority to items. After installing both addons, make sure Classloot is enabled for your tooltip - go to Options - Interface - Addons - Classloot.
2. Make yourself familiar with the workings of LootHog by inviting a guildie into a party and doing a test roll, or just leaving it on when you do an instance. The window that pops up when a roll has been registered looks like this:

Hit 'options' and please turn on the option that says 'disable loothog when someone else is masterlooting'.
Note: LootHog only registers rolls done and gives you an overview of who rolled in a seperate window. It does not distribute loot to the announced winner.
3. In an instance party of 5, ask your guildies if you're allowed to test your masterlooting skills. Ask the party leader to set loot to rare and looting to masterlooter.
Note: Changing the loot settings will only go into effect after the current mob has been looted. If you had group loot on, changing to masterlooter while you have a mob to loot will not change the way the loot on the current dead mob is handled.
4. Announce the roll. Tell people in party/raidchat what items dropped (by shift-clicking the items), and announce the rolls one by one for each item.
Note: In a raid, you can mouse-over the item icon to learn what classes have priority for rolling according to Kaliban's Loot-lists (http://www.wow-loot.com). If none of the recommended classes is present, the item is (of course) rolled for by the people who can use it for an alternate spec, and if nobody can use it, sent to a disenchanter so the shard can be put into guildbank.
Classloot looks like this:

5. The scary bit: Assigning the loot. When all interested parties have rolled, you can assign the loot. When you click an item of rare quality or higher, a little menu will pop up asking you who you want to assign the item to.
Note: People who were not present when the boss died (zoned out/released or had a severe disconnection issue) might not show up in the popup and thus not be able to get loot!
The little menu looks like this:
You are then asked for confirmation:
And the lucky winner rejoices!
Remember: If you make a mistake - it happens! We're all human. You can send a ticket to the game master with time and date, and item; and who you gave it to. They can correct the mistake and move the item to the right person's inventory. However, the person that received the item by mistake should ticket as well, so Blizzard knows you're not ninja'ing with their help ;)