I'm new to D&D and would like to distribute treasure evenly in my dungeon for my level 1 PCs. I've read up briefly on the treasure packages but am still a little fuzzy on how they exactly work and what sort of treasure my PCs would be interested in.
This is based on the DMG's version of treasure packets:
You start by planning out your encounters. There are roughly ten encounters per level, and that's probably about how many you want to plan at a time.
The DMG gives you several pre-generated packets. These get divided between the ten encounters in any way you wish. You could give one packet per encounter, or you could allocate a few of them to the "boss" encounter, and have some encounters that don't give meaningful treasure. You can also set aside treasure packets as quest rewards.
Magic Item Selection
The DMG doesn't give much in the way of guidelines for picking the magic items to give to the party. The advice it gives is the most straight-forward way to do it: ask the players for a list of items that they'd consider interesting, and pick treasure from those lists (with the occasional odd-ball but potentially useful item of your choice mixed in).
An alternate way of distributing treasure is to simply give the players a "5th level magic item," and allow them to decide who gets the item and what it is. This has the advantage of allowing the players to assume a bit of the research, but does tend to take a bit of the excitement out of the game.
Finally, you can hand pick the items yourself. However, this requires intimate knowledge of how each class works, and what builds the players are going for.
Generally speaking, there are fewer magic items per level than there are members of the party. And the value of the item varies considerably from the best to the worst. You have to be careful when assigning treasure that it can be distributed evenly... If the best item each level is always a ranger-specific item, the rest of the party will start to get weaker.
Packets the party misses should be made up later on in the adventure. If they took a route where they missed an encounter that had treasure, it should be added to a subsequent encounter (lumped into a dragon's hoard, or added to the quest reward, for example). Most DMs will create a list of packets, and check them off as they are handed out. Each time the party levels up, they should have received ten treasure packets total.
Let me start with two assumptions in answering your question. The party has 5 characters and they are 3rd level each. I am doing this deliberately to help you focus on the mechanics of the system and then take those mechanics back to your group.
Standard XP rewards are basically setup to work on an 8-10 encounter basis. This means that within 8-10 encounters a typical party of 5 characters will go up 1 level. The treasure parcel system is a way to parallel this. Remember that encounters are NOT the number of rooms/areas explored or passed through they are the number of fights, traps, skill challenges or other events that require characters to worry about their health.
DMG 1 Page 126: During the course of gaining that level, expect a group of five characters to acquire four magic items ranging in level from one to four levels above the party level. In addition, they should find gold and other monetary treasure equal to the market price of two magic items of their level.
A 3rd level party would receive 4 magic items (levels 4, 5, 6, 7) and about 1350gp in monetary items. Looking at the parcel system as shown on page 126 of the DMG1 you will see this laid out in exactly that fashion. 10 parcels nice and neat. There is a guide on page 125 for adding or removing gp value and magic items based on actual party size. The PHB1 on page 223 has nice table of the gp vaule of magic item by level.
Now here is the trick. While this is a good guide of what to give out it is not a hard-set-in-stone law. You can combine, rearrange, add to or delete from this guide list to adjust for what makes sense for your campaign. You can give out 1 parcel per room or all at once or anything in between. Do what makes sense. Fighting 8 rooms of humanoids and 1 room with a dragon and all the treasure is in the dragons lair might just make sense.
As for how to pick magic item for characters I use three methods that overlap.
I have found that using the parcel list a basis and then tweaking it to fit the campaign really simplifies my game prep time. Using the 3 methods of magic item selection has given the party good balanced selection items that they can use and like to use.
NOTE: Be sure to rotate the highest level items in your parcels to be given out equally among the party characters.