Different people mean different things when they talk about network licenses.
Getting the licenses from a central location, instead of storing them in a local file, greatly simplifies system administration and prevents problems such as lost passwords or orphaned licenses. It also allows system administrators to install Mathematica licenses on more than one computer per process, enabling users to access Mathematica both in their offices and on the production line. You can administer licenses centrally. MathLM , the Mathematica 4 license server, lets system administrators store and control all Mathematica passwords and track usage in a single location. You can implement a concurrent-use model.