Interpretation of 8582 Special Allowance for Rental RE Activities

[David Lao]

"Special Allowance for Rental Real Estate Activities

Active participation. If you actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities."

What does this mean? What's the difference between "nonpassive" and active (W2) income? Is this saying that there are special cases in which up to $25,000 of passive losses can be used to deduct from a W2 income?