Particularly with football, the players would not be able to afford to go to college without a scholarship, nor get into college without receiving some preferential treatment.
I'm sorry, I think I might be misunderstanding you, so I'll try to elaborate some. Each athletic program has a certain number of scholarships they give out. In the case of football, these scholarships are awarded almost entirely without regard to the academic quality of the athlete. How true that last statement is varies greatly from school to school, but in general, they only need to meet some pretty minimum requirements. If your question is _why_ do schools do this its because football brings in a LOT of money.
The same thing happens to a lesser extent with basketball, but for the most part other athletes of other sports have to earn there way in to school like everyone else.
Yes, college football is insanely popular. I live in a county of 200k people that has absolutely no trouble filling up a stadium of 90k people for home games. The skyboxes sell in the millions, and the best seats in the stands require a 10k/year donation for the right to purchase them. TV deals are also very lucrative, and I would assume so is merchandise.
I don't think UF is really very different than a lot of the other major football schools. Most of them are in pretty moderately sized cities, especially in comparison to cities with professional teams. Green Bay is the only NFL city that's college town sized.
I remember when pg wrote his essay about what messages cities send, the only message I could I think of that Gainesville sends to me is something along the lines of "You should watch gator football." It was a harsh realization, because I do like it here, and now I really wonder if this the right place for me.
The problem is that without the huge income from sports there would be no money for the scholarships in the first place. In fact I attended LSU on an academic scholarship that was partly funded by the athletic department. Yes, it's not fair that a bright student won't get the same scholarship that a dumb athlete will get, but the dumb athlete brings in millions in ticket sales that fund his scholarship and scholarships for the rest of the student body. It's screwy but our society would rather spend money watching football than on science, but until thousands of spectators will pay $100 to watch me do long division we're stuck with this system.
