1) School dependent (and division dependent) as most have pointed out. A preferred walk-on means the Coach knows who you are, and you have the perceived opportunity to compete for a roster spot. It is not a level playing field competing against scholarship or slotted athletes that the Coach has previously hand picked. Absolutely no guarantees here. This is a difficult path, and it is a long, long way to finding the playing field.
2) For the D1/D2 schools that have the ability to include athletic scholarships (but don't for you) you are essentially a "Rodney Dangerfield player" getting no respect behind scholarship and slotted athletes. If your ego is fine with it, then Godspeed.
3) For the D1/D3 schools that don't have athletic scholarships you have to be admitted first. For some of these schools that can be a very challenging step which is why it is better to get a coaches support (a slot or tip) through competitive admissions. Again, the coach has his hand picked athletes that he sponsored through admission in front of you. Rarely, do Head Coaches second guess themselves or make themselves look bad.
As always, JMO.