Is this Xwindows or 'real' telnet sessions? When users are running an Xwindow emulator, it's a lot more complicated. The user is not running telnet but instead running CDE on their PC or other Xterminal display device. And starting a window is not a real telnet -- instead, they are asking the Desktop manager to start a program on the HP-UX box called dtterm or xterm, which in turn starts a session locally on the HP-UX box. The characters that you see on the screen were formed on the HP-UX box and the image is displayed on the Xwindow device. CDE/Xwindows complicates things considerably.
To verify 'normal' operation, use a PC to actually telnet to the system -- start a DOS window and telnet to your box. Then repeat with 3 additional sessions logged on as the same user. The 4th login attempt should be rejected if NUMBER_OF_LOGINS_ALLOWED=4.
I am not a fan of CDE at all, and use Xwindows *only* when there are graphics and drawings (but not CDE). A text window such as xterm or dtterm is a big consumer of bandwidth and PC power when a local telnet (or better yet, an ssh session for security) window is extremely low overhead.
I don't have a system to test CDE logins but I'm going to guess that login count is used to get the fancy desktop (CDE) started and then another one for each terminal window.
Bill Hassell, sysadmin