Im not entirely sure

Does it mean that if you pick a Nord/Dunmer/Argonian, you are placed in the Ebonhearts and cannot create an Altmer/Breton/Etc??

I want to make a High Elf, and my brother wants an Orc, but we wants secondary characters so we can play together... will that even be possible!?

Yes, if you make an alt on each others factions, faction lock means no faction can leave their faction specific zones, so you will never see an Argonian or Nord in Summerset Isles, and you will never be able to go to Skyrim. Well, players atleast. There will probably be NPC's for quests.

Your High Elf can't play with his Orc.

But you could make a Breton to play with his Orc or he could make a Bosmer to play with your High Elf.

I know your answer may be given, however, there is an existing discussion here...http://www.gamesas.com/topic/1438916-race-and-faction-restriction/

It may answer your inquiry further and in more detail.