From what I can tell, the NFL has made a mistake. Terrelle Pryor should not be in the NFL supplemental draft. For any one who does not know, the supplemental draft is for players that did not enter into the NFL draft and whose NCAA status has changed since the deadline to declare for the draft. For example, Caleb King from Georgia is also in the supplemental draft. Since the regular draft, Caleb King was declared academically ineligible. Because of this he was allowed to enter in the supplemental draft. To my knowledge, Pryor's status has not changed since the draft. Because of this he should not be in the supplemental draft.
The supplemental draft is not like the regular draft in April. It goes in the same order, but instead of making picks the teams say what pick in the draft they would give up for the player. If the player is not selected, he becomes an undrafted free agent. For more info on the supplemental draft, about.com has a pretty good article on it.