Q: Why does the Windows Server 2012 R2 Automatic Virtual Machine Activation (AVMA) work only if the host is Windows Server 2012 R2 Datacenter edition?

A: Server 2012 R2 introduced AVMA, which allows Server 2012 R2 virtual machines (VMs) to automatically activate when running on a Server 2012 R2 Datacenter host which has itself been activated. The reason AVMA is only available if the host is Datacenter and not Standard or the free Microsoft Hyper-V Server is that Datacenter gives you unlimited number of virtual instance rights running Windows Server.

Thus, if the Datacenter server itself is activated, that means you can have any number of VMs also running Windows Server. Standard edition only allows 2 virtual instance rights and Microsoft Hyper-V Server includes none. This is why only Datacenter allows AVMA, as only Datacenter includes licensing for an unlimited number of VMs running Windows Server.