ArcSDE is the tool that allows you to store and manage spatial data in your chosen DBMS. ArcSDE works with a variety of different databases including Oracle, Informix, IBM DB2, and Microsoft SQL Server.
ArcSDE Server Licenses
You purchase the right-to-use any number of DBMS instances on your licensed CPU's. You pay a per-cpu fee for this right based upon your machine's CPU configuration.
An ArcSDE Server keycode is used to "turn on" ArcSDE capabilities in the ArcSDE Application Server and in the ArcEditor and ArcInfo seats. The license manager controls ArcSDE Server keycoding. The number of ArcSDE instances is not counted.
ArcSDE Connects
All ArcGIS Desktop seats can connect to and use ArcSDE technology as part of their seat license. This is included in the seat price for ArcView, ArcEditor and ArcInfo 8.1. These ArcGIS Desktop seats are called "trusted clients". Other ESRI software (ArcView 3.x DB Access, MapObjects 2.x, CAD Client, and C API clients) require the purchase of an ArcSDE Connect license for each seat.
ArcSDE Server
An ArcSDE server instance consists of a single ArcSDE I/O manager process connected to a DBMS instance. A host machine may have several ArcSDE server instances running on it, but only one may be connected to any DBMS instance. Each ArcSDE server instance uses one ArcSdeServer license.
ArcSDE Client
An ArcSDE connection is made when an application (such as ArcInfo or MapObjects) requests a connection to an ArcSDE server and the request is accepted. Multiple ArcSDE connections from one machine with the same DBMS connection (username and password) use one ArcSdeConnects license. For example, if three ArcSDE client connections exist using Oracle DBMS, two connected with username\password "joe\joe" and one with username\password "oracle\oracle" then two ArcSdeConnects licenses would be used.
For more information on ArcSDE please see Understanding ArcSDE book located on the Digital Books and Samplemaps CD.