The DIY silnylon discussed in this thread uses a silicone sealant (caulk) disolved in mineral spirits to soak the fabric. After the mineral spirits evaporate and the silicone cures, the result is a fabric with the space between threads filled with silicone.
A silicone spray/scotchguard type product coats the surfaces of the threads but does not fill in the voids. It raises the surface tension (or something similar) of the fabric and causes water to bead up. Water "pounding" on the fabric (rain) can still be forced between the threads causing leaks. A bag made of this type material and pressurized will leak as well.
While my details may or may not be a little off, I believe the general ideas to be correct.