This post has been written so I and others can start to understand vSphere licensing
Comparison of vSphere 5 Editions
VMware vSphere 5 licensing
vSphere 5 will be licensed on a per processor basis with a vRAM entitlement. Each vSphere 5 processor license will entitle the purchaser to a specific amount of vRAM, or memory configured to virtual machines. The vRAM entitlement can be pooled across a vSphere environment to enable a true cloud or utility-based IT consumption model. Just like VMware technology offers customers an evolutionary path from the traditional datacenter to a cloud infrastructure, the new vSphere 5 licensing model allows customers to evolve to a cloud-like “pay for consumption” model without disrupting established purchase, deployment, and license management practices and processes. Unlike vSphere 4.x licenses, vSphere 4.x licenses, vSphere 5 licenses do not impose any limits on the number of cores per processors and maximum size of RAM capacity per host
Licensing PDF
http://www.vmware.com/files/pdf/vsphere_pricing.pdf
A diagram showing licesning changes between vSphere 4.x and vSphere 5.x
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