Here is an example of a walkon. Once in a blue, blue moon you might see a walkon with decent ratings, but it's extremely rare. Most have only red or black potentials when they are assigned to your team. And no, they aren't taken from the pool of recruits (though, this would make a little more sense). They are just random, terrible players put onto your roster.
As I said before, as long as you don't offer them a scholarship, they'll leave after the season is over and you'll get money to fill their slots. So if you have 2 seniors and 2 walkons, you'll get 4 scholarships worth of money the following season.