From the IBM Passport Advantage webpage, we see that:

“Sub-capacity licensing lets you license an eligible software product for less than the full capacity of your server or group of servers. It provides the licensing granularity needed to leverage various multi-core chip and virtualization technologies.”

Sub-capacity licensing can save you (a lot of) money. But, it adds (a lot of) complexity to IBM license management.

Also as noted on the same page—sub-capacity software licensing terms are documented in the International Passport Advantage Agreement (IPAA).

Most Processor Value Unit (PVU) based IBM software products are eligible for sub-capacity licensing. (The exceptions are noted here: Passport Advantage Sub-capacity Licensing Eligible Product Statement). PVU licensing is based on the processor technology and is defined in the PVU Table on IBM’s website.

Full capacity licensing simply means that you must license the full physical capacity of the server or group of servers where the PVU licensed software is installed. Or, in more technical terms:

If using Full Capacity licensing, the Licensee must obtain PVU entitlements sufficient to cover all activated processor cores in the physical hardware environment made available to or managed by the Program, except for those servers from which the Program has been permanently removed.

SOURCE: blogs.flexerasoftware.com