Based on what I heard from a Microsoft rep last month, it goes by CPU socket. Therefore, a single dual-core Pentium Extreme Edition w/ Hyperthreading enabled would show up as 4 logical CPUs, but only count 1 towards the total.
You could do, for instance, TWO dual-core Opteron's on regular XP Professional and still have 4 physical cores, and fit under the licensing agreement.
Desktop machine: 2 x Opteron 246, Asus K8N-DL, 2GB PC3200 ECC Reg., XFX GeForce 6600GT, 74gb WD Raptor, 2 x 19\" LCDs, Windows XP x64
Server machine: Intel P4 3.0GHz 2MB EM64T, ECS i865pe, 1GB PC3200, 36gb WD Raptor, Windows Server 2003
Laptop: Dell Inspiron 9100 (Intel P4 3.2GHz 1MB Prescott, i865pe, 512MB PC3200, Mobility Radeon 9700, DVD+R/DL Burner), Windows XP
Linux: P3 450Mhz, 386MB ram, Slackware 10.1 (Running mySQL/Apache)