When you sign up as an individual or a with a group, you'll be asked about your relative skill level. This isn't choosing a division; for most sports, if you're placed on a free agent team, we just can't put you in an upper division -- it isn't just about skill, but about chemistry and team composition. You won't enjoy it, and neither will the teams you're playing.
We use the skill level question to help put you with similarly skilled players to have the best chance to gel and make friends/future teammates. If an existing team requests players, we use that information to select the players to place with that team.
When you register your team, the team captain chooses their preferred level of play. This is a starting point, but isn't guaranteed. We have guidelines in place to help us fairly place teams based on previous seasons performance, and promote and relegate teams each season based on that criteria.
Not every league is guaranteed to have divisions (we use them whenever we possibly can), and the specific divisions vary season to season based on the teams that sign up.