It can, you just incorrectly guessed what's the required input for it to work (the author didn't do a very good job at showing the environment in line 29).

If you pass to grep a multi-line argument as the pattern (or a pattern, for -e option), grep will treat each line of this argument as a separate pattern. Or at least that's what GNU grep is doing.

"echo ${data}" worked (and only somewhat and accidentally) because while the first line of ${data} got a prefix of "echo ", the other lines stayed the same.

`cat filelist.txt` didn't work, because grep got the content of filelist.txt as a separate arguments (one word per line, if I guess the content correctly) thanks to shell's word splitting, so grep treated the first filename as a pattern and the rest of the filenames as files to search for the pattern. If the filelist.txt contained a name that didn't exist, grep would print an error message for ENOENT. Note that in this scenario the output of `ls' was not read by grep at all.

If it was "`cat ...`" (double-quoted form), wordsplitting wouldn't take place and the grep call would work as the author was expecting.