How do you choose which pokemon to transfer?

If you have candy and stardust its better to look at IV, but I would say pre lv. 20 or if its like slight difference in IV, but one has much higher CP then go for the higher CP one.
I say pre lv. 20 because thats when I just wanted strong mons to attack gyms with, now that I am 30+ I care only about IV, I prefer a 90% IV wih 300 CP than something with 70% IV and 1000 CP for example, of course it depends on the monsters, Chancey or Snorlax I don't have the candy to be that picky :))

For me it's dependent on a lot of factors especially the rarity of the pokemon. Generally, I transfer the low IV ones. However, if it's a high IV but very low CP / Low Level, I might toss that one out as well because to great candy/dust investment to power it up from a low level. Again, it really depends on the pokemon and how easy it is for me to get in my area. I think most set an base IV limit that they follow, meaning they toss anything below 82% for generally common mons. Hope this helps a little. I am sure more people will respond.

As I've increased my own level, I favor high IV, prefer a 15 in 2 categories based on appraisal.... and obviously any 100% PKM. If you're in the game for the long haul, then candy and dust will come, but probably will never be able to change IV.
One other exception to the super-rare mons to keep are potential prestigers - eg Jigglypuff or Clefairy with average IV but a 15 for stamina are keepers!

The first question I ask myself is will I EVER spend stardust on this pokemon in it's most evolved form.

In your example (Machop), the answer is probably yes - Machamp is a good Blissey/Snorlax counter when attacking gyms.

In that case, I would prefer the one with the higher IVs, evolve it, see if it has a good moveset, and if it does, power it up to your desired level.

If the answer is no, IVs don't really matter - you only care about initial power, which is a function of both IVs and level. for example, a Wigglytuff that you keep for prestiging but will never be a great attaker/defender, I care more about CP than IV. I just want one that is in the right "CP Range". If it is higher IV/lower level or lower IV/higher level, I don't care - the rough power and usefulness is about the same.

So, in your case, I would keep the 70% Machop and transfer the 40%. If it was a Wigglytuff, I would reverse that logic. (Actually, I'd probably transfer them both and wait for a better Machop - to spend stardust, I want at leat 85%IVs)

I think there are four categories of "useful" pokemon. (I'm not counting trophy ones like the babies)

For attacking enemy gyms I keep the ones with the best movesets and high CP. For pre-evolutions like Machop I would generally just go by CP unless I found one in the top third of CP that had really good IV's.

For prestiging gyms I am targeting good movesets and a final CP of between 1100 and 1300. Use the calculators on this site to figure out what CP of Swinub will give you a Piloswine in the right range.

For defending gyms it's currently all about CP. Moves hardly matter. High IV = higher max CP.

The fourth category is "waiting" - those that have a higher level evolution coming in the future, like Murkrow and Electabuzz... I keep a few high IV ones, and as much candy as I can. This is also the category I would put breeding stock - for example, I have one female Snorlax and several males, I will not transfer the only female, in case they ever implement breeding.

The rule you should follow is... Am I gonna evolve or power up this pokemon? Can I use it as it is? If the answer to both questions is no, then transfer it.

If the pokemon is common (like a machop) if the CP is too low (ask less than say... 2k stardust to power up), I won't even check the IV's, just transfer it on the spot, the reasoning is... I don't really want to invest soo much stardust for a common pokemon with a level that low.

If the pokemon is rare, then I'll check the IV's even if the level is low, just in case it's actually above 82%, as a rare pokemon with good IV's might be worth investing the dust and candies, even if it's a lot of them.

Most of the time I hold out for a 80+ IV mon anything less I usually transfer unless its a rare one that I cant get many of like snorlaxs. Then once I evolve it if it has the move set I want I power up that bad boy, If not I try the whole process over again. Been good so far but still trying to find that Kick Ass Rhydon.

Honestly to me it feels like if you buy incubators it's normally transfer for low IVs and if you don't buy incubators then watch CP closely. Outside of super rare mons of course.