Here is the best explanation I could find from http://www.deseretnews.com/article/8...p.html?pg=all:
"Provo, UT ó A consortium of universities today announced the formation of a new top-tier post-season 15s rugby competition. The new competition will be called the Varsity Cup Championship (VC).
The founding universities include: Brigham Young University (Provo, UT); the University of California (Berkeley, CA); the University of Utah (Salt Lake City, UT); the United States Air Force Academy (Colorado Springs, CO); Dartmouth College (Hanover, NH); the United States Naval Academy (Annapolis, MD); and the University of Notre Dame (South Bend, IN). Other founding participants may be named in a subsequent release.
The founding rugby programs have long histories as top-10 programs, with AFA, BYU and Cal being multiple-time national champions.
The mission of the VC is to provide the participating teams with a superior platform for showcasing the highest level of rugby in America and to produce a commercially attractive national invitational championship that serves the interests of players and fans alike.
The Varsity Cup Championship will be played out over three consecutive weekends beginning in the latter part of April 2013.
With its commitment to the Varsity Cup, each team will remain a member in good standing with USA Rugby."
I think essentially the Varsity Cup means a school can choose to be in D1A or D1AA and play a league schedule of their own choice, but then are competiting for a championship through the Varsity Cup format come the end of the year. I believe I've read that some schools Varsity Cup will also compete for a "National Championship" via the traditional USA Rugby format, but that most will compete for the Varsity Cup only as they view that as a top-level championship competition. Confusing indeed...