Micro Niche Sites: lets break it down;
Micro: small or specific
Niche: A category
Site: ...
Micro Niche Site is a site that is specific to a category within another larger categoty.
Ex: Health is a niche, a micro niche within health would be people looking for possible treatments for a specific disease.
So in order to find a micro niche, use google keyword tool, try to find a subject that has searches for it such as volleyball balls (example), than try to find different related phrases (keywords) that get searched for. Ex. Red volleyballs, green volleyballs, blue balls ;p
When it comes to looking at competition, there are a number of factors you need to look at, look at the top 10 ranking sites for the keywords you want to rank for, some of the factors are:
How many backlinks the page has?
How old it is?
Does it have the keyword in the title, description, and H1?
Here is what I recomend, LEARN some SEO before you try to do this, at least the basics, then you would be able to know what your looking at when reviewing these factors.
This is really just an overview, there is a TTTTOOOOONNNNN of great info about this ALL OVER the forum, just look it up.
Good Luck