Un-protected purchases do not have this restriction: I added a DRM-free iTunes song to my library that Jason had purchased, and it immediately showed up as "Matched," no authorization required. (Of course, giving songs to your friends is still illegal. iTunes Match doesn't change that.)
Both of these methods will require a track that still exists on the iTunes Store; if the track has been pulled, you'll be given the option to upload the song, but when you re-download it, it will return to your library as a protected .m4p file (if it has DRM) or a DRM-free file with the original owner in its metadata.
While there are almost certainly ways to abuse this feature, it's good news for families and other groups who bought iTunes music from more than one account in the bad old days of DRM. Once you purchase a subscription to iTunes Match, you can merge all your music into a single Apple ID by re-downloading tracks, and on top of that, you can stream it to ten different devices. It only works for music--you can't do this for mobile apps, videos, podcasts, or any number of other iTunes Store purchases--but it's a nice start.
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