But how will PPL be able to tell if a digital music file has been legally, or illegally downloaded?

“Of course, this would be very difficult,” said Leathem.

“But we’ve given digital DJs a lifeline with this license, and we’re more concerned about those that continue to play digital music in public without it.”
i.e. Download illegal music as much as you like once you've bought our licence, we won't give a flying fcuk.

The bit that concerns me the most is I often play stuff off CD.

Sometimes my own stuff, sometimes other people's... nearly always with the permission of the copyright owner... but it sounds like even with this licence, I might get into some kind of bother unless I was playing it off a lappy.