The original purpose of the lottery seems to have been the selection of a "scapegoat" to take away the evils that prevent the crops from doing well. Suggestion of this idea comes with Old Man Warner's recitation of "Lottery in June, corn be heavy soon."
While the connotation of "lottery" in contemporary times is positive as people hope to win money or prizes from drawings, the original practice of drawing lots was to select someone out of a group who would be the one to perform some task or duty that was dangerous. For instance, sailors or soldiers would draw lots--these could be various sizes of straw material, string, or kernels, nuts, etc.--to see who would have to be the one to perform some dangerous task in hopes of their being able to escape the danger or situation in which they found themselves.
That the original purpose of this lottery has been forgotten is of itself significant because it conveys Jackson's message that people often blindly follow traditions for which there is no longer any significance, and that they often enjoy inflicting gratuitous violence on one another.