1. Naked Short Selling is illegal. There is an exception for market makers that allows them to trade naked shorts but that is beyond the scope of this discussion.
2. All short selling done by retail customers, hedge-funds, etc. is all 'covered short selling'. This means that the stock being sold is first 'borrowed' from a third party. The third party is paid interest on their loan of stock which is their incentive for loaning it out.
3. There is no absolute time limit on the duration of a short position, but long-term short positions are difficult to hold because you still have to pay interest on the stock your borrowed which eats into potential profits.