Taharos, Chapter 2, Mishnah 4. This mishnah is the middle of a short set of three mishnayos that map out the different levels of tumah, tracking how far the chain of impurity reaches in ordinary food, in terumah and in kodesh. Each of the three closes with the same happy ending: a food that has traveled far enough down the chain to have shed its tumah entirely, and may therefore be eaten together with a stew of kodesh. Here the mishnah takes up the levels of tumah in terumah.
The mishnah begins: "harishon vehasheni shebaterumah, temei'im umetam'in." A first degree and a second degree of tumah in terumah are two things at once. They are themselves tamei, and they are also mechanically active: each of them passes tumah along to the next item of terumah that it touches, so that the chain continues to a further degree.
Next: "hashelishi pasul velo metamei." A word about the text before the idea. The printed mishnah, and very likely the one in front of you as well, reads posel, that is, that the third degree disqualifies. That reading does not fit here, because by this point in the chain we already know that a shelishi in terumah has no power to render anything else pasul. The alternate girsa, pasul, is almost certainly the correct one: the mishnah is telling us about the status of the third degree itself. Terumah that has become a shelishi is pasul, it is disqualified food and may not be eaten, but it is inert. It does not transmit tumah onward to anything at all.
And finally: "veharevi'i ne'echal binzid hakodesh." Terumah that has reached a fourth degree carries no tumah whatsoever. That is why it may be eaten even in a nezid hakodesh, a stew made of kodesh, and specifically kodesh that is holding a fourth degree of tumah. The stew has a status; the terumah at the fourth level does not. Since the terumah brings nothing with it, there is no concern about the two meeting, and this piece of terumah may join the kodesh in that stew.
So the picture in terumah is a chain that shortens as it goes: two degrees that are tamei and pass tumah on, a third degree that is spoiled but harmless, and a fourth degree that is free and clear, and can even find its way into a pot of kodesh.