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I'm under the assumption you are free to do as you wish; there are many
big-name commercial applications out there that use Lua.

The license is very similar to BSD.  The line you asked about is
granting permission to the copyrighted works, i.e., the source code. 
Your own code, and your binaries based on that code, may place all the
licensing restrictions on them that they want.  The Lua portions, are,
perhaps, allowed to be copied - how useful it is to be able to copy 3%
of a binary file is debatable.  The license doesn't clearly state what
the "Software" is.

Suffice to say, however, that a commercial application can be written
using Lua, and that application as a whole may remain as an inferior,
buggy proprietary product all it wishes to.  ~,^

On Wed, 2002-05-15 at 13:06, Philip Bock wrote:
> I have written a program which uses Lua, which I intend to distribute in
> binary-only form. I was just looking at
> and wondering how this license applies to this situation. Does the line
> which saya, "The above copyright notice and this permission notice shall
> appear in all copies or substantial portions of this package" also apply to
> binary programs linked against the Lua library? If so, does this imply that
> my program must be freely redistributable if it uses Lua?
> Thanks, Philip Bock