Multilevel queue scheduling divides processes into separate queues based on attributes like priority or process type. The ready queue is divided into a system process queue, interactive process queue, and background process queue, which are run in order of decreasing priority. Each queue can use a different scheduling algorithm like first come first serve, shortest job first, or round robin. This scheduling method allows for different treatment of process types but risks starvation of lower priority queues if higher priority processes continue arriving.