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how do balloons compete?

Using Only the winds

Hot air balloon competitions consist of accuracy flying tasks where pilots navigate their balloons to specified targets.  The difficulty lies in the fact that balloons have no steering wheel.  Directional control is obtained by finding winds that are traveling in the direction you need to go.

Pilots climb and descend to catch different wind currents to steer the balloon.  In the video to the right you can see on this flight the pilot must climb to several thousand feet between targets to find the correct wind.

The tasks

The simplest and most common flying task  requires pilots to fly to a target and deliver a beanbag (see video to left for example).  The pilot who's beanbag, or marker, is closest to the center wins the task.  Pilots receive points based on their placement in each task with 1000pts being the best score.  These points are tallied over multiple tasks and multiple flights and the pilot with the most points at the end of a competition is declared the winner.

There are some 20 different tasks currently listed in the official rulebook, but all revolve around the simple principal of piloting a balloon to a specified point or points.  Watch this space for a complete list of tasks in the near future.
Australian pilot Andrew Robertson explains the basics of balloon competition

Robbo Talks About Stuff - Episode 1 - Balloon Competitions from Andrew Robertson on Vimeo.