I've been freelancing for a little under a year (I'm a work-at-home dad
First of all, don't let the fact that you have to compete with dozens of other bidders take you down, as most of these are just low-quality unprofessional washouts or even outright scammers.
If you put some effort into your proposals (like sending the employer a private message letting them now you've actually read the bid, showing links to related portfolio, etc), will get you noticed faster than paid highlights or anything of the sort.
Ask the employer a direct question related to the proposal, so that he feels compelled to answer (once any type of actual conversation is started, you're leaps and bounds ahead of the competition).
Feedback and reputation are very important, as they're the superficial tools that let the employer gauge your risk and potential, so you have to start building them somehow.
My technique when I'm first starting on a site is to bid low (though not the lowest), put in a line such as "Since I'm building my freelance portfolio, I'm willing to work below my standard rate", and never charge any money upfront (yes it's a risk, but I've never had any problems so far).
Always keep your proposals short, clean and direct, as employers are usually busy people who don't have time (and don't care) to go through all the fluff.
Mention your schedule and availability, and try to be available through Skype or gTalk during work hours, so you can report to your employers if need be.
When choosing which projects to bid, go for the ones that are a little out of the ordinary, or that may require specific skills that are not available to everyone.
Try to bid on less projects and focus on getting in higher quality proposals, than to post crappy bids left and right all over the place.
I've started my freelancing venture with just two flash projects, one for a virtual makeover tool (http://danielbrinca.com/makeover), and an AAC radio player (http://danielbrinca.com/audioplayer), and these became so successful that now I'm able to win bids just by showing these off, or any of their spin-offs, to a new client.
You can also consider doing or participating in an open source project, even if you feel you're not good enough, and show this off to your clients as this will prove that you're serious and have the determination to see your projects through.
Yes there is a lot of competition out there, but if you're professional and competent, you're already a cut above the rest, so all you need is to be able to demonstrate this to strangers.
Once you land a few jobs, you'll probably start winning more bids (and you may then ramp up your rates), or even get new jobs from previous employers.
Hope this helps,