There are a couple of differences between Remote Administration mode and Application Server mode, but the primary one is the purpose of the connection. You are correct that Remote Administration mode supports up to two simultaneous connections (and, if you need them to be for users instead of administrators, follow the directions at http://x220.minasi.com/forum/topic.asp?TOPIC_ID=3959). I don't recommend using Application Server mode unless you're running an application server. First of all, you'll need a license server (see the licensing link in the previous question to understand why). Second, changing the mode of the service will make the server prioritize applications like a workstation (foreground applications get priority) instead of a server (all applications have the same priority). This can impact server application performance.
This was first published in August 2004