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Locke starts by stating that, whether by natural reason or the word of the Bible, the earth can be considered the property of people in common to use for their survival and benefit. He then posits a key question: if the earth and everything on it is the common property of humankind, how does one come upon individual property?
For individual property to exist, there must be a means for individuals to appropriate the things around them. Locke starts out with the idea of the property of person--each person owns his or her own body, and all the labor that they perform with the body. When an individual adds their own labor, their own property, to a foreign object or good, that object becomes their own because they have added their labor. He uses the simple example of picking an apple--the apple becomes mine when I pick it, because I have added my labor to it and made it my property. This appropriation of goods does not demand the consent of humankind in general--each person has license to appropriate things in this way by individual initiative.
Locke then places a bound on this type of acquisition--a person may only acquire as many things in this way as he or she can reasonably use to their advantage. To continue the apple example, I can only take as many apples as I can eat before they go bad; if I take too many apples and some of them rot and go to waste, I have overextended my natural rights of acquisition. One can only take so much as one can use. Locke applies these rules to land: a person in a state of nature can claim land by adding labor to it--building house on it or farming on it--but only so much as that person can reasonably use without waste. Locke then defines labor as the determining factor of value, the tool by which humans make their world a more advantageous and rewarding place to inhabit.
Locke finishes the chapter by tracing the genesis of money. He notes that all useful goods--food, clothing, and so on--are generally of short life span. However, if one collects too many apples, one can then trade them for nuts with someone who has too many of those, and thus barter develops. Money fulfills the need for an imperishable valuation of worth, rooted in the property of labor.
Locke's premise in this section is quite simple: people have the right to appropriate goods by adding their labor to that good, thus making it their own. This right goes for all sorts of things, including land itself. This right is bounded by what one might call the law of subsistence--people do not have the right to take more than they can use. Money, backed by labor and the natural rights of people, becomes the basis for expansion beyond the subsistence level of property.
Once trade is established, it is logical for people to want some good of common value to trade for all goods--this need leads to money. The limitations that Locke places on property in the state of nature without money are as follows: one must put one's labor into something to claim it; one cannot take more than one can use (rule of subsistence); and money subsumes both.
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