Well Phaq did a pretty good job but it's a bit of both, lol.

The license does NOT come with the books. I had to subscribe to the WoTC (now named CockasaurasRex) and use a community tool to "scrape" the books from the insider account.

Once I have the raw data I can parse it and build the "modules" that the software uses. This allows us to drag and drop equipment, feats, spells, powers, anything into your character sheets, etc.

Now add in volumes like Monster Manual 1, 2 and 3 as well the additional supplement books and I have everything I need, in reference fashion, that I can also drag and drop and create adventures. It's all linked within the software and the combat is more automatic than not. You still roll dice but the dice are in the game as 3d renderings of real dice you pick up, shake and throw smile

So again, a little bit of each but the software comes licensed with 4E, 3.5 and other rule sets such as Savage World, and others. You can build your own rule set as well so if we wanted and someone hadn't made one we could play Warhammer or even Darkfall if we came up with a rule set for the game and applied the concept of the online game to pen and paper smile

Check out the tutorials and videos if your interested as the guy there did a great job showing the abilities of the software but by no means all of it..