The difference is that an ordinary free agent can sign whenever. An undrafted player who is in a college program can be signed if he is 20, and only after the final game of his college team's season.... and only after being undrafted two times.
So the NHL can't bust a top contending college team apart by grabbing their star players in the middle of the championship playoffs, making the entire playoff tournament a farce in the process.
NHL.com - Top college free agents who could sign with NHL teams
Now, why does a player good enough to be a Hobey Baker finalist manage to be undrafted? We're talking about late teens to early 20s. That's a period of rapid physical, mental and emotional development/maturing for any young adult. He might not be the same type of player he was coming out of high school. It's the same reason why you might see a player who was not offered a football or basketball scholarship, then not drafted by a pro team go on to have successful careers. Sometimes their potential doesn't really get unlocked until they are in the right situation, and sometimes teams just miss when they evaluate.
Also, since the very top talent usually go straight to top-tier minor league programs, being a very good college player does not translate into hockey success like being a top player in college football or basketball. Even looking at the list of Hobey Baker winners, let alone finalists, you don't see a lot of superstars. Spencer Foo doesn't seem to be, especially, considered to be a shoo-in for greatness, at this point, because of his fine college career. I'm not sure that this is really all that remarkable.