Actually, it's 5 computers, unlimited devices (the same as songs).
Technically, the sharing this way is allowed for computers in your household - and you will see a post on here about someone who got apps from a friend that isn't anymore. You indeed need that persons PW to get them again.
There is also sharing as part of iTunes now, which is supposed to let you share libraries with other people in your house. I haven't tried it - i have a "sneakernet" system in place and it works well for the household (i'm assuming that was probably what was in the video).