See
How to Obtain SQL Server 2005 Mobile Edition.
"You can deploy SQL Server Mobile to an unlimited number of mobile devices that run Microsoft Windows CE 5.0, Microsoft Windows XP Tablet PC Edition, Windows Mobile 2003 Software for Pocket PC, or Windows Mobile 2003 Software for Smartphone, provided that they operate in stand-alone mode. In stand-alone mode, the device does not connect to or use the resources of any SQL Server system not present on the device."
[I think the reference to XP Tablet PC Edition is erroneous, SQL Mobile will not run on this platform AFAIK.]
So, if you're
only using SQLCE and not using replication connecting to a server, it's free.
If you
are using replication, you need to have a server CAL for each handheld that will connect to the server (in addition to any other applications connecting to the server), or use per-processor licensing.