Although this question usually comes up with regard to a Canadian player, you will occasionally meet an American that swears up and down their cousin got a "lacrosse scholarship" at Princeton or "hockey scholarship" at Harvard. So what's the deal?
In a nutshell, a need based financial aid package is usually a mix of loans, grants and work study. However, in the case of athletes, the mix is skewed toward grants given the lack of time for work study. Thus, if you get a 25,000 aid package and most of it is in the form of grants, many people, from either side of the border, would fail to make the subtle distinction between that and a scholarship. In other words, it is a sloppy bit of semantics; "scholarship" rolls off the tongue much easier than "need based financial aid."
With regard to Canadians specifically, the semantic issue is central to the confusion. According to one of eLynah's resident canucks, "most Canadians refer to any kind of [financial] help as a scholarship because we don't have need based financial aid."
When you consider the US-Canadian exchange rate in conjunction with the median Canadian income, it is easy to see that even solidly middle class Canadians would still qualify for rather generous need based financial aid. In 2000, the median Canadian income of a 2 parent household with children was $77000 CAN. With an exchange rate of .6362, that works out to about $48k a year. Thus, a well off Canadian that comes to the US to play hockey may get a sizable reduction in tuition, which to a Canadian appears to be a scholarship, but in fact is just need based aid.
Finally, the picture becomes even most confused given Princeton's recent decision to make up 100% of need based aid with grants. That's right, Princeton has a big enough endowment and a small enough student body that *no student*, athlete or not, has to take out student loans. Thus, an athlete that may have gotten an admissions break might also get a large no-loan break on tuition, depending on how much Mom & Dad make. To an outsider, this may easily appear like an athletic scholarship. However, rigidly defined this is still need based aid, not a scholarship.