I did my PhD in Cambridge, so my experience with Colleges is different from students reading for an undergraduate degree. What degree are you going for?
In my case I applied directly to the research group I wanted to do my PhD research at. The group leader decided he wanted me. I then had to apply to the university as a formality, and as part of that I had to select a preference for a college. I could make a first and second choice, but as a foreigner from a country where we don't have this system, I had no clue how to even select a College (all College websites kind of looked the same to me when I applied 10+ years ago). I ended up only selecting a first choice based on a coworker who knew something about the Cambridge Colleges from personal experience. I didn't get an offer from then for a, in my view, BS reason but I guess that's their prerogative.
Because as a PhD student your desired group leader makes the choice whether to take you or not, when they take you, you WILL be made an offer from a College. Because I only selected one College preference and they didn't want me, I ended up in the 'pool'. Colleges can see students' applications for the students in the pool and then make an offer. Obviously these are Colleges that perhaps don't get as many direct applications as they have spaces, so they are perhaps the less-wealthy, less-famous Colleges.
I have limited understanding of the application procedure for undergraduates but I think for undergrad you apply directly to the College and if they don't make you an offer, then you don't get to study at Cambridge for an undergraduate degree (at least not with them!).
College housing can be hit and miss. I was very disappointed by the housing offered at my College (not even a guarantee of any kind of housing despite being a foreign student and having no other way to find anything myself as I didn't yet live in the UK; and the housing I ended up getting was not good at all). I spent most of my time in Cambridge in privately-rented accommodation, most of it was bad too even with a PhD stipend (which is very low when you live in Cambridge). I think if you are an undergraduate and you are young, possibly are only spending the term time in Cambridge, College housing might be alright or even pretty good, if you are lucky. But for a PhD student when you work the whole year, working long days, and are usually at least in your mid 20s if not older, a small room in a noisy house with 5 housemates isn't great, especially not for four years. Most of the housemates I lived with were nice, though.
I did enjoy certain aspects of Cambridge but for me the housing situation really took a toll on my mental health which affected my performance in my research. And this was despite being willing to spend up to £750 a month on housing (well over 50% of my stipend; this was in the early and mid 2010s).