Isn't it legalized in Holland? Anything goes in Holland ;P
The term isn't legal though, it's some sort of superior dutch understanding of the law, they understand the big picture: if they tried to stop it by force, like everywhere else, they would have drug trafficking and delinquency, like everywhere else, so what they do is adopt a system to control it. I'm sure one of the dutch here can elaborate but the many times I've been in Amsterdam locals always told me the same story about it still being illegal and then went on to explain all these things.
I mean, I believe it's technically illegal to carry weed around, regardless of if it's in your backpack and not in a joint, but they're never going to check. Because tourists camp from coffee shop to coffee shop and obviously they're not going to smoke everything they buy in the first place. I was eating in a terrace one night last summer and I saw like 30 cops walking across a very populated avenue, they formed a wall and starting looking at everyone's backpacks, I was like "great, there goes our 100€ in weed we have on us", turns out, they were just looking for weapons
Now, last time I was there, this January, it was already in process of being removed totally (coffee shops included) from all Holland except for Amsterdam, I asked and apparently it's because cities get the last call on enforcing such law and Amsterdam generates a lot of income from weed tourism (nothing compared to the sex tourism, but still).
And they ask for IDs in 99% of the places, and are pretty strict about it (I couldn't get in one because I left my ID at the hotel and I could look 30)