I understand where you're coming from. Some parents have been through this when they were in school so know how it works. I can only describe how the schools nearby me do it.
1. Some coaches keep up on local leagues and may be familiar with a few kids already, some kids start attending summer HS sports camps or baseball camps at the school they plan to attend at young ages. This can also give caches an idea of who should be on their radar.
2. Incoming Freshman summer camp/league/scrimmages is where it really begins. Our school had no fall play for freshman. I can say in hindsight it's probably not mandatory you attend summer ball. Many kids who made the Spring team did not do summer ball.
3. Tryouts styles vary. Our school announced with little fanfare freshman interested in playing baseball meet at the bleachers after school one day (around mid January here in CA). From there it was show up at 4:00 ready to practice. About 30 kids did. Practice was 5 days a week, some scrimmages were mixed in, some very tough conditioning days now and then. Live BP, cages, the works. It was not at all like little league try-outs. After about 4 weeks they advised the kids to check a website for a list of names. They cut about 5 kids and continued daily practice. A few weeks later they again cut 5 more with personal interviews. Baseball season runs about early March to mid May in CA. About 15 games plus a few out of league games. If you need to understand what league your school is in, who they play, start at MaxPreps. As far as I can tell only Spring Varsity games "count" in the sense of city and state rankings, stats, etc. Think of JV and freshman as development for "the Show" (Varsity).
4. Our school placed 3 freshman kids on JV (The school runs Varsity, JV and Freshman), 2 of the 3 were brought down a few weeks into the season (I assume they didn't perform as well as expected). About mid season 1 kid went up (he was hitting really well), and at the end of the season a couple more got in a few JV games (again they were hitting well). Varsity is generally 11-12th grades, JV 10th, Freshman 9th.
5. What determines the level you play is up to the coaches. Some kids just can't compete higher up because of size, maturity, attitude and skill. If kids keep working and progressing they will play for 4 years. I see no reason to try to "play-up" if they're not ready. My son fit in very well as a freshman, built confidence and made a lot of new friends.
6. At the end of the freshman season there was a few weeks off then the unofficial summer league began again, the freshman now being called JV. All were invited back.
7. And I'll add many parents I talk to are kind of let down by HS baseball. Some schools have few practices, indifferent coaching, weak competition (might just be the lower levels). Many kids continue to play travel, scout teams, etc all through HS in the off season thinking it's necessary to make it at higher levels.