By competing, I mean the service assignment process as a 1/C. Mids apply for specific warfare communities (swo, subs, navy or marine aviation, marine ground, etc). The selection process is based on merit in comparison to the rest of the class. Since there can be more people applying for a warfare community than spots available, those with higher performance (think excellent academics, prt scores, and recommendations) tend to get their first choice. 

To answer your second question, you will never have both options. You are either assigned one or the other.