The virtual lab is like a chat room with shmancy features. Etsy's article about them for more information is here, or you can just go in and play around when they're empty (my preferred method of figuring things out in general).
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When a specific shop gets critiqued, Michelle will go through and comment on whatever catches her attention, but the shop owner can ask specific questions, and everybody else in the labs will also comment on things they notice about the shop. The biggies tend to be banner/avatar, photos, tags, announcements, descriptions, prices/shipping, but all sorts of other things may be discussed, particularly if a shop's are glaringly good or bad. For the most part, people aren't mean about things, but if something needs work you are likely to hear about it. Michelle is particularly artful at addressing issues without sounding insulting. I'm much more inclined to say things like "Why would anybody buy a banner from a shop with a blurry banner?" and "Jewelry looks stupid with random-ass props." Occasionally you'll get people who are even meaner and/or more direct than that, but for the most part, it's constructive instead of useless and effusive like many a forum or friend critique.
In all my many weeks of showing up, I've only been critiqued twice myself. I wasn't avoiding the hot seat on purpose, as my first few weeks I tried to get on the critique list but wasn't chosen, but I stayed and listened anyway. Honestly, this was for the best and I think everybody should be required to sit through at least one night's worth of critiques before having her shop looked at, because I learned so much by hearing other shops get critiqued. My photos have gotten a gazillion times better not through my own critique but by looking critically at other shops and hearing advice on ways other people could improve their pictures and applying them to my own work. And that's what Wednesdays are amazing for: you can listen to and participate in talking about everybody else, and at the end of the night, you find yourself making changes in your own shop and drasticly improving all around. At least, that's what I do.
My best advice? Show up and shut up for at least an hour. You'll need a decently fast connection and sound, and the ability to apply things said about others to yourself. But if you can manage those things (and consciousness after 9 PM EST on a Wednesday night), you're in for a treat.
Fin.
*NOTE: Photo from Etsy Labs' Flikr of some other virtual lab thing, but gives you an idea since I didn't take a screen shot.