Using it in a domain, yes. However by default, when you install wordpress by uploading the folder, you essentially create a subdomain called “wordpress” and that’s not against the T&C.
I think it (the domain thing) probably has to do more with brand recognition than anything else… but you’d have to ask Matt and the other devs what they mean by it to be sure.
But essentially, as a designer, when I charge my client to install wordpress and theme it, I’m technically charging them for the transfer of the software from me to them. I’m not charging them for the software itself, but my work in installing and theming for them.
Personally? I despise the idea of paid-for plugins, regardless of what they do, or who they’re geared toward. It goes against the open-souce ideals that wordpress itself was built upon. JMHO… and I’m an Internet Marketing / SEO specialist. (Nevermind the fact that typically, people can view plugins from someone’s site anyway, and get your code for free.)