We are thinking of using a XenCenter has our Hyper-Visor and wanting to use Server 2012r2.

How does the Licensing work and how many VM's can I technically create?

I know 2012r2 comes with a Key for the OS for the host and key for 2 vm's. Since I will be using XenCenter does that mean I can use all the licenses and create 3 VM's?

No, one license is a host license, it's assigned to the physical machine regardless if you install it or not.

The other 2 instances are for VMs.

No, one license is a host license, it's assigned to the physical machine regardless if you install it or not.

The other 2 instances are for VMs.

Ok so I am only allowed to use the 2 instances for the VM?

The other license is strictly for physical host machine?