This really just makes me think the feature is simply going to be the ability to scale down your character level when running old content.
Considering this feature is slated for the last content patch of the expansion, I don't think it will be introducing classic raids to LFR or making old dungeons into challenge modes. It doesn't make sense to go through the effort to re-tune a bunch of old content for LFR or challenge modes that's just going to be out of date again with the next expansion close behind.
My guess is Blizzard thinks they can get more new players hooked on the game if their max-level friends can play with them without having to either re-roll or otherwise ruin the experience by trivializing it. It also plays to the portion of the fanbase that always wants to go back to vanilla. Of course, it won't really be anything like vanilla, and the tuning will be way off, but that won't stop them from playing it up like it's the greatest thing ever.