WWE shows interest in a person but not enough to sign them to NXT. Instead they receive a contract that gives WWE right of first refusal, so if AEW or MLW came calling WWE could match the offer and sign them to NXT or pass on them. While under the WWE ID contract they continue doing what they are already doing otherwise.

Every report I’ve seen basically sums it up how you did, so you’re spot on.

I believe I also read, if correct, the WWEID folks may receive a minor stipend per month as well to assist with their development, but confirm that in case I misread someones dumb idea as fact.