This Datacenter license allows for unlimited instances of Windows Server 2016 (or previous version) in virtual machines on this host. In place of the licensed version (i.e. Server 2016) , you can run prior (older) versions or lower editions in any of the OSEs of the licensed server. If you have Windows Server 2016 Datacenter edition you will have the right to run the bits of any prior version or lower edition (Datacenter, Standard or Essentials). If you have Windows Server 2016 Standard edition, you will have the right to run the bits of any prior version of Standard or Essentials edition.

The WS2016 standard edition enables to run two OSEs. If you need more OSEs, you have to buy additional licenses.