The "cutting of the Koran", or istihkara, is used to determine whether it is expedient to do a thing. An individual who is anxious about some matter of business, or about his health, when at a loss to know what to do, gets a Mulla or some one who has read a bit of the Koran to perform the istikhara. Old women who know some of the Arabic characters will do most of this work for women and villagers, but in the towns and cities there are always professional "readers" available. One of these men will read the first sura, then pray in Arabic, "God, thou knowest what is hidden!" He will then repeat a part of sura 6:59: "And with Him are the keys of the secret things; none knoweth them but He; He knoweth whatever is on the land and in the sea." Then he will give the salutation to Mohammad and his household, salalahu 'alaihi wa 'ala ahlihi wa sallam. "Prayer and peace be unto him and his people and his family." He will close his eyes, turn his face upwards and utter the name Allah, while he draws his fingers from the back of the book up among its pages. He then opens where the fingers enter and reads the first sentence or part of a sentence on the page. From the character of the words, he gives his inquirer an answer as to the outcome of the matter he is contemplating.
Some Korans are especially prepared for this purpose and have their pages marked with letters which indicate what the answer is to be. Some have only three letters, kh for khair, meaning good; sh for shar, meaning bad or unfavorable; and mim for miana, signifying medium. Other copies have more details. Nine letters and combinations indicate very good, good, fair, medium, not good and bad. These signs simplify the reader's task and relieve him of the responsibility for an unfavorable interpretation.
People resort to istikhara most frequently in regard to matters of health and concerning medical or surgical treatment. They use it also in connection with business undertakings, or in considering whether to accept employment, or form partnerships or make journeys. Nowadays it is commonly used to determine whether the particular automobile in which the journey is to be made is worthy.
As an example of its use in matters of health, a person goes to see a doctor and his case is diagnosed as one needing surgical treatment. He is so advised and arrangements are made for him to enter the hospital. But he excuses himself for the present, saying that he must go home and inform his family, and that he will return in the morrow. He does not return. Days, or maybe weeks, later he appears, ready for the operation. His story is that the istikhara repeatedly came out against the operation and that he could not come until he had obtained a favorable result. Sometimes the patient will take one unfavorable cutting of the book as final and the hospital will not see him again.
In the Miftah al-Jannan, pages 361-390 are devoted to detailed directions for performing the istikhara with the Koran, as advised by the Imam Ja'far Sadik.
(Quoted from: The Koran as Magic)