MS second hand purchase plan: Retail partners were "part of process"

[Euphoria14]

Someone correct me if I read this wrong, but here is how I was reading it. Mind you I am exhausted.

#1.) I buy a XBox One title and bring it home.
#2.) I install it on my machine and the game is linked to my Live account.
#3.) Due to being linked to my account, I do not require the disc to play it.
#4.) I lend the game to a friend.
#5.) Friend installs the game to his XBox One.

Now (2) different things happen from this point on.

#1.) Friend can play the game without the disc as long as he is logged into my Live account or purchases the game on Live with his account. (A purchase grants him his own validation key, enabling him to play the game without having the disc)

#2.) Friend can play the game as long as my disc in the in his XBox One since the data installed is linked to that disc.

I am only seeing it this way because he keeps mentioning "When you take your disc home".