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Office 365 E3 includes "Office Professional Plus 2010 desktop version subscription" (for up to 5 devices per user)

What is the actual licensing mechanism for this subscription?

That is, how would this work in an environment where you're preparing a ghost PC image to be used for multiple people? Can you pre-install Office 2010 from the standard installer and then track the licensing centrally?

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The Office licensing is reliant upon the subscription agent (osubsvc) and the sign in assistant service (msoidsvc). The user credentials to O365 are used by the signing assistant and the subscription agent to determine if the user is licensed to use the Office installation. The Office instllation is then licensed for 30 days before the user is prompted to license the instllation again. If not licensed again it enters reduced functionality mode. See http://technet.microsoft.com/library/gg702619(office.14).aspx#BKMK_SKUComparison for details

I have not built any machine images (ghost or otherwise). But I expect the above two services to work together with the O365 user credentials to determine of the user is licensed to use the Office copy. Admins can determine using Powershell as per http://social.technet.microsoft.com/wiki/contents/articles/11349.office-365-license-users-for-office-365-workloads.aspx or the web portal which users have been licensed to use Office.

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thanks for the answer, very helpful. So I see that "Office 2010 Professional for Office 365" is a different installer to "Office 2010 Professional". The link you provided also gives roll-out options. They don't mention pre-imaging the PC but sounds like it might work if you used the correct installer (the office 365 one, not the vanilla Office 2010 one) –  codeulike Jan 17 '13 at 14:52
    
if you are happy with the answer, may i suggest you accept it? –  maweeras Jan 17 '13 at 20:56

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