Normally you got 10 teams right and about 18-20 players per team so anyone who isn't drafted is a free agent, normally because they aren't worth owning but if you suffer an injury or one of your players is a bust then you are gonna wanna drop them and pick up a free agent who offers more to your team, thereby making the guy you drop a free agent. Sometimes players no one expects to be beasts will not get drafted and can be picked up as free agents as well i.e. Peyton Hillis last year and brandon jackson was a popular FA pick up after Ryan Grant got hurt week 1...
In a satdnard league Free Agent priority usually goes to the worst teams I think and there is like a waiver order of who can pick up players but the leagues I am in use a FAB system where every team has a budget to spend on free agents and if you wana pick someone up you enter how much you are willing to spend on them into a blind auction and whoever bids the most gets the player, this is a bit more advanced though because it can be difficult to judge prices for newer players