When the new round of Strategus begins, youre given the option to join one of 6 factions or stay neutral. The six factions would occupy the same areas as the Warband single player factions, see map and alt map:
People who choose to go neutral at first could join a faction at any time by selecting someone in a faction and doing the apply thing, just like now. You could quit a faction at any time but would have to wait a week before joining another.
All the town/castles/villages already belong to factions, so there would be no more initial neutral village defenses. People from other factions staying in your towns would have to pay a high visiting fee but your faction members would only pay the 1 gold fee. These places in your starting territories would still be like neutral village/towns/castles though, so someone within your faction could take a town/castle/village to better control it's defense or raise taxes and visiting fees. If another group within the faction doesnt like this, they can attack their fellow faction members town. So there would be the chance for fighting between groups within your faction.
Also, if someone did attacking one of the locations within your home territory, it would behave just like neutral villages now, letting anyone sign up. So because there are 5 other factions spread around the map, there might be more people willing to sign up for the defense of a neutral town without fear of retaliation.