It is an illusion of money, like after you deposit your money at MTGOX, the web interface shows you a number on your account, and you think that money is real
When the Federal Reserve buys a U.S. Treasury bond, it credits the U.S. Treasury with new money, created out of thin air. The only collateral is "the good faith and credit of the U.S. Government." The Treasury can spend that money, illusory or not, for real goods and services. It does this over and over again, thus causing inflation, a hidden tax on everyone who holds dollars.
What you are talking about is base money, it is real money and spendable. Do not mix it up with checkbook money, which is just a number on your account.
You deposit 100 dollars into a bank, then bank loaned out 90 dollars to other people and keep 10 dollars. Your account statement still shows that you have 100 dollars in your bank account, but 90% of those dollars are illusion and can not be spent by you (Double spend is not possible). When you withdraw those 100 dollars, banks will have to find another 90 dollars to give you
In reality there are many different type of accounts, money in most liquid accounts might not get loaned out by banks, but money in those long term saving accounts definitely get loaned out