The order goes:

rhythm
rough outline - this is the 'It's a nice noise' level of listening
being able to pick out lines
being able to hear all of the lines at once distinctly and/or hear the chords as chords if they're not playing individual lines (depending on what's in the music)
being able to understand the complete structure built by the different lines

People with the last skill are incredibly rare, because they have a combination of listening, memory and intuition which doesn't happen often. Mozart notoriously was supposed to be able to do this, writing out an entire piece from memory - probably not by remembering all of the notes, but by remembering enough detail and knowing enough about music to know how the elements would be put together.

Most people seem to live in the first two areas. They can maybe pick out a line if asked to, or maybe not. Trained musicians should be able to, but people without training probably wouldn't.

There are also two different kinds of pitch hearing - perfect pitch, and relative pitch. They don't work in anything like the same way. People with perfect pitch can tell you the name of a note and the key a tune is by listening to it. People with relative pitch can name the interval between two or more notes, but not what key they're in.

You can't follow lines without some relative pitch ability. But... listening is easier than labelling and you can still experience a line as music without necessarily being able to write out the notes on paper. Learning to do that takes training and effort.

I put some time into developing my listening, and I found that when I practiced naming intervals my pitch discrimination improved. I could hear more detail and also hear when things were out of tune. (Not always a good thing.)  

I have a faint ghost of perfect pitch, but it's very undeveloped.

I don't have much of a memory for structure at all.

I can't sing for toffee without a line to follow, but I can improvise easily around a structure I've learned or know already. (A lot of music uses the same few simple structures, so once you've learned  them you don't need to be able to pick them apart from scratch.)

So it's not either/or. I'd expect your friend probably put some time into training his ears or had lessons. If you did the same you'd likely move in that direction, even though you won't be hearing the same things in the same ways.