Yeah it sounds pretty interesting. It works off of the idea that you can lend your music to a friend, and you can make a backup of something, what you can't do is listen to your backup while the other person listens to the original. So they let people 'upload' their songs to get a number of keys and then when you want to listen to a song, whether you own it or not, as long as there is an available key it should be legal. If it holds up I would LOVE to see this for movies and TV shows.
While the legal principle backing their idea (first sale rights) is pretty solid, I doubt it will hold up here. The courts have not been kind to first sale and fair use rights in the past 5 years. This case is also complicated by the fact that there is no way to ensure that there is no concurrent use. While the system can ensure that no two people simultaneously use my copy of a song, it cannot ensure that I am not using my copy while someone else is.
Even after reading the FAQs I don't see how this is legal. I'm pretty sure you still need a blanket license to give access to major label music. Seems to me that you can download music off of other people like a p2p.without paying royalties.