GSoC With Gnome - From View Point of a Past Student
Why it is cool to work with Gnome as a GSoC student
Basically it's because it's a cool community 
People are very friendly, so you don't have to be afraid to ask a question because there is someone to always answer your question as possible as they can. Sometimes it may be your mentor, another community member or even an administrator. Also you can propose any idea you come up with and it's assured you won't be ridiculed no matter how absurd the idea is.
The procedure
This was the procedure of last year and it's likely will be more or less the same in this year around also.
1) First go through the idea list of Gnome GSoC page.
2) Try to find a project idea that is interesting to you or in case you have your own idea then the community would be thrilled to hear about it; Please suggest it in the ideas page according to the guidelines given. Also checking in Gnome-love mailing list(http://mail.gnome.org/mailman/listinfo/gnome-love) can give some idea of how developments for various projects going on. To get an idea of how last year GSoC had been you may need to check Gnome-GSoC mailing list - http://mail.gnome.org/archives/gnome-soc-list.
3) Get all help you can from the community to write a good proposal.
4) If you are new to the world of Free software you can use the interim period between project acceptance and coding start (According to 2008 timeline April 14 - May 26) to get used to FOSS way of life. Even if you are familiar with FOSS stuff you can use this time to bond with Gnome community and to study about the project you are planning to work on. Additionally you can use this time to write some test codes, get them reviewed by your mentor and basically to come to a point where you can carry on your development without a hindrance.
5) Always notify the community and specially the mentor about status of your project. Usually this is done through Gnome-SoC mailing list and by posting a weekly report of your work. If you forgot to do this, an admin may ping you - so better keep everyone aware of your work every week.
6) Always keep attention to the Gnome-SoC mailing list, announcements and the time line. It will help you to avoid many headaches.
7) In case you run up to some problem with your mentor (hopefully not and rarely happen) contact SoC admins. Oh they are very friendly, don't be afraid to approach them. They won't bite.
8) That's all I can think of - Enjoy your Summer with Gnome
Additional Resources
About Me
I'm Buddhika Laknath, a 2007 Summer of Code student worked on Gnome document project to create a new document editor with Python. http://code.google.com/soc/2007/gnome/appinfo.html?csaid=80FB0FA809768E72