What does "on-premises Exchange Server" mean?

We have Exchange 2010 Standard edition without any Enterprise CAL. We are wondering if we are able to enable Archive Mailbox since it displays the following message while trying to enable the feature:

A personal archive located on an on-premises Exchange Server is a premium feature and requires an Exchange Enterprise CAL for the user.

Since we don't know what the "on-premises Exchange server" means we went ahead and set up for two users with the archive mailbox. Both two uses are currently using this feature. So can you tell us if we should or shouldn't entitle this feature?
And by the way, what does "on-premises Exchange Server" mean?
CastlewoodAsked:
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Joshua GrantomSenior Systems AdministratorCommented:
On-Premise Exchange Server means your exchange server is hosted at your business location or on hardware you have.

If you are going to use the feature, you need to purchase Enterpris user CAL's for each user that is using this feature. I would get in touch with Microsoft licensing.

Even though it let you enable the feature, it is a violation to use the feature without purchasing the proper user CALs and you can be fined by Microsoft.

Also, even if you decide not to use the feature, you still need to purchase user CAL's for each user that has a mailbox. Having a License key for exchange does not give you user licenses as well.
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Tim EdwardsIT Team Lead - Unified Communications & CollaborationCommented:
To add to Joshua's comment if you are looking for Archiving ability you can also talk to Microsoft in leveraging their cloud solution for archiving if this is something that may work for your environment. The mailbox will still stay on premise but if hardware and resources pain point in your organization you can archive to their cloud solution which your Outlook clients will connect to for the archive mailbox access.
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