DRM Free Music With iTunes Match & Apple Music

I think the difference is in the second paragraph that you posted. In your situation, if you have bought less then 7,000 songs from iTunes, then the rest counts against the storage.

In other words, it looks to me that only the songs that you bought from the iTunes store will not count against your 25,000 song limit. All other songs will (whether bought from somewhere such as Amazon, or ripped from a cd) likely count against that limit.

Keep in mind that you can have more than one Apple ID with purchased music in a library and according to the FAQ - only the Apple ID paying for iTunes Match/Apple Music is exempted from the 25k song limit.

It's not clear whether Family Sharing is all considered "one Apple ID" so you might want to be sure you re-download all family songs under your Apple ID if you are running up against a limit.

In late 2009, Apple bought LaLa.com, a site that did pretty much what present day iTunes Match does.

It analyzed tracks you already owned, and allowed you to stream the ones you already had on your hard drive.

The way the technology works is by analyzing the waveform of the music file and matching it to an existing database of known song digital audio fingerprints.

Obviously, that's way oversimplifying, but the basic idea of why you don't have to upload a lot of your library, as iTunes Match and formerly LaLa.com have an existing db of song "fingerprints."