Yes, Basketball is played in college. This is called college basketball. There are multiple conferences in which the teams play in (i.e. ACC, Pac-10, Big 12, etc.). At the end of the season, the top ranked teams go head-to-head in a giant playoff system called "March Madness."
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No many players are recruited with little or no scholarship money. Other players also "walk on".
No, but it would help if you play high school basketball for experience, chance of scholarships from various colleges, test your skills against other teams, etc.