The bolded part is how I've always seen it described.  With the addition of, "It seems when everything is codified by a rule, then players will only do what they have a rule for."  I.e., players won't attempt to have their PC pick a lock unless they have the lock picking skill.  A player might not have their PC participate in a discussion because their PC has a lower persuasion modifier than another PC.  Rulings over rules helps mitigate that, and encourages everyone participate or otherwise attempt things, IME.