Many tools, like Union, state that the Basic and Standard licenses provide "Limited" use. How are the use of these tools limited with these licenses?
well with example you gave, it is stated in the help file
With ArcGIS for Desktop Basic and Standard licenses, the number of input feature classes or layers is limited to two.
with an advanced license you can use more than 2 layers or feature class all at once
In explanation for Union their is this statement:
So for example if you wanted to Union 40 feature classes, you can't do them all in one shot.
Edit - Dan Ninja'd me again
Chris Donohue, GISP
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