This question actually came up very early on in my game. The answer is effect based. Characters taken as followers have character statistics and can therefore do anything you ask of them. ( Fight individually, forge a new sword, etc. ) Characters that are not taken as followers, while they still exist and are loyal to the player, do not provide much in the way of "usefull skills or combat." It is accepted that they are there more as flavor text and it ends up that they cause or are in volved in more problems than thier worth. Basicly, the followers are your closest advisors and generals, or anyone in a command position.