For the first question, when sign-ups go up in December, you sign up in the thread. Then there is a live auction once sign-ups conclude, where the managers and their assistant managers nominate players. Each team has an amount of money to spend and they spend that money to create a team. A player must sell for at least 3000 points.
Once the teams are drafted, a player is slotted into each metagame spot available. They fight the player in the matching opposing team's metagame spot. So Team A's and Team B's SM OU1 spots will face off, as will their GSC OUs.
Qualifiying just means signing up and getting drafted in the auction, which usually means getting your name out there in the community by doing well in tournaments or on ladder, although tournament results are quite often preferred. If you can show you can play at a high level, you are more likely to be drafted.