To show a featured product first we need to set products as featured . To do so we need to create the product attribute named as "featured".

Create an attribute-

1) Create a new attribute by going to Catalog > Attributes > Manage Attributes > Add New Attribute.

Attribute Properties

Attribute Identifier: featured
Scope: Store View
Catalog Input Type for Store Owner: Yes/No
Unique Value (not shared with other products): No
Values Required: No
Input Validation for Store Owner: None
Apply To: All Product Types

Front End Properties

Use in quick search: No
Use in advanced search: Yes
Comparable on Front-end: No
Use In Layered Navigation (Can be used only with catalog input type 'Dropdown'): No
Visible on Catalog Pages on Front-end: Yes

Manage Label/Options

Default: Featured Product
English: Featured Product

2) Now we have to add newly created attribute to the attribute set. Go to Catalog > Attributes > Manage Attributes Sets to add the attribute to the default feature set.

3) Create a new file, and directories: app/code/local/MyPackage/Catalog/Block/Product/Featured.php

class MyPackage_Catalog_Block_Product_Featured extends Mage_Catalog_Block_Product_Abstract {
      public function getSubCategory($category_id) {
        $idList = "";
        $categories = '';
        $layer = Mage::getSingleton('catalog/layer');
        $category = Mage::getModel('catalog/category')->load($category_id);
        $categories = $category->getChildren();
        $idList = $categories;
        $list = explode(",", $categories);
        foreach ($list as $ccid) {
            $cat = Mage::getModel('catalog/category')->load($ccid);
            if ($cat->getChildren())
                $idList .= "," . $cat->getChildren();
        }
        return $idList;
    }

    public function getFeaturedProduct() {
        $storeId = Mage::app()->getStore()->getId();
        $ccontroller = Mage::app()->getFrontController()->getRequest()->getControllerName();
        $categoryId = $this->getRequest()->getParam('id', false);
        if ($ccontroller == "product") {
            $productId = $this->getRequest()->getParam('id', false);
            $cproduct = Mage::getModel('catalog/product')->load($productId);
            $categoryArr = $cproduct->getCategoryIds();
            $categoryId = $categoryArr[0];

            if ($cproduct->getTypeId() == 'bundle') {
                $bundleFlag = 1;
                $bundleCategoryId = $categoryArr[0];
            }
        }
        $resource = Mage::getSingleton('core/resource');
        $product    = Mage::getModel('catalog/product');
        $currentCategory = Mage::getModel('catalog/category')->load($categoryId);
        $isTopCat = 0;
        $categoryLevel = $currentCategory->getLevel();
        if ($categoryLevel == 2)
            $isTopCat = 1;
        $csubcats = $currentCategory->getChildren();
        if (!empty($csubcats) || $ccontroller == "product") {
            $subcats = 0;
            if ($categoryLevel >= 2) {
                $pathArr = explode("/", $currentCategory->getPath());
                $subcats = $this->getSubCategory($pathArr[2]);
            }
            $categoryId = $this->getRequest()->getParam('id', false);
            $resource = Mage::getSingleton('core/resource');
            $read = $resource->getConnection('catalog_read');
            $categoryProductTable = $resource->getTableName('catalog/category_product');
            $productEntityIntTable = (string) Mage::getConfig()->getTablePrefix() . 'catalog_product_entity_int';
            $eavAttributeTable = $resource->getTableName('eav/attribute');
            if (empty($subcats))
                $subcats = '0';

            if ($bundleFlag == 1) {
                $subcats = $bundleCategoryId;
            }
            $select = $read->select()
                    ->from(array('cp' => $categoryProductTable))
                    ->join(array('pei' => $productEntityIntTable), 'pei.entity_id=cp.product_id', array())
                    ->joinNatural(array('ea' => $eavAttributeTable))
                    ->where('cp.category_id IN (' . $subcats . ')')
                    ->where('pei.value=1')
                    ->where('ea.attribute_code="featured"');
            $featuredProductData = $read->fetchAll($select);
            $i = 0;
            $product = array();
            $productid = array();
            foreach ($featuredProductData as $row) {
                $productid[$i] = $row['product_id'];
                $i++;
            }
            $productid = array_unique($productid);
            $i = 0;
            $prodObj = '';
            foreach ($productid as $id) {
                if ($id != '') {
                    $prodObj = Mage::getModel('catalog/product')->load($id);
                    if ($prodObj->getVisibility() == 4 && $prodObj->isSaleable() == 1) {
                        $product[$i] = $prodObj;
                        $i++;
                    }
                }
            }
        } else {
            $product = '';
        }
        return $product;
    }

}

4) Lets create the template file for featured product listing.

Go to the directory and create "/app/design/frontend/mytheme/template/catalog/product/featured.phtml" and put below code in a file as per your design of page.

   echo $this->__("Featured products");

$product = $this->getFeaturedProduct();
if ($product) {
    foreach ($product as $_product) {
        echo "Product Name" . $_product->getName() ."
";
        echo "Product Price". $this->getPriceHtml($_product) .  "
";
        echo "Product short Description" . $_product->getShortDescription() .  "
";
        echo "Product Image" .  $this->helper('catalog/image')->init($_product, 'small_image')->resize(200);
          . "
";
        echo "Product URL" .  $_product->getProductUrl() . "
";
    }
}

5) Add entry to local.xml file located at app/etc/. Add following set of lines inside the global tags.

< blocks >
    < catalog >  
        < rewrite >  
            < product_featured >MyPackage_Catalog_Block_Product_Featured< /product_featured >   
        < /rewrite >  
    < /catalog >  
< /blocks >