This came up in a forums thread, so I figured it was worth a blog post just to add another search engine hit for it since it is a confusing naming choice, and hopefully this will help clarify what "Workgroup Edition" really means (short answer: read it instead as "5-user Edition" and you'll be ok).

My "summary" entry in that thread is as follows.  See my entry in the thread for more details if you're interested.

Just to try and help clarify for others that see this thread.  There are 2 usages of the word "Workgroup" when it comes to Team Foundation:

1) usage of Team Foundation in a "Workgroup" scenario - that means that the actual users using Team Foundation are "Workgroup" users in the sense that they're not Active Directory users, but users leveraging the Windows built-in "Workgroup authentication" mode.  IOW, this usage of "Workgroup" is talking about authentication.

2) Workgroup Edition (aka 5-user version) of Team Foundation server.  This is the version that comes with Visual Studio Team System client SKU's, and is limited to only 5 users being able to use the system (this limitation enforced via the users having to belong to a special LicensedUsers group).  Outside of that limitation, it's the "real" Team Foundation server.  It's just running an upgrade tool on the application tier to upgrade from this "5-user" mode to the "real" Team Foundation server.  IOW, this usage of Workgroup is talking about team size.