The limitation is for users with privileges. Not all users have privileges, but when a user is assigned a privilege he becomes a staff user, and has access to Admin Area. These are the users who must be licensed.

For example you can have 1,000 users with a KBPublisher account, but if only five of them have a privilege then you have five staff users, and your license only needs to cover these five. We have another example on the User Licensing page.