On it's surface, this rule seems like it discourages outside participation, but I look at this as more like the 75% participation rule that rec leagues have. It ensures that the team a school takes into post-season is composed of it's regular season players, and prevents schools from stacking a team with kids who skipped the regular season in favor of travel.
Pretty much... I believe PA has another rule that limits the number of players from one school that can participate on the same "non-school athletic program", but I was unable to find that one. If I remember correctly, no more than 5 can be on the same team. And I also believe it limits what the high school coaches can do away from the school team. But the PA rules are definitely not as strict as some other states I have seen.