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In the new license definition in SharePoint 2013, it is mentioned that there are no more license prices for external users or when building external facing website or portal. But still I cannot understand how to differ between internal & external users for SharePoint. Are these terms pure legal terms or they are related to the functions and feature the user will be using inside the SharePoint application.

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There is no setting in SharePoint where you would define which user (or how many) is internal (using CAL) or which one is external (without CAL). You pay for the internal user CALs, and externals come "for free".

So, you could put up a internet site with SharePoint and only purchase CALs for internal content producers. Usually companies do also have SharePoint intranet/other services on SharePoint, so they'd have CALs anyway.

You do also need Windows Server + SQL Server licenses, and Windows Server External Connector license. Some examples here.

In SharePoint you would differentiate internal and external users by using Zones. users coming through http://ext.company.com would be external users and belong to "Extranet" zone, while internals would come through http://int.company.com and belong to "Intranet" Zone.

Disclaimer: You need to verify these from a license reseller, your scenario might have special conditions.

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upvoted, but keep in mind that external users should be completely "external" to the company to be entitled for the free license. If they are collaborators or binded to the company in some way, they need to have their own license like internal users. It's more for scenario like external communities or external partner site (which will have unknown users that are not part of the current company) that this "come for free" applies :) – Francois Verbeeck Feb 25 at 16:00
are you talking about "external users" in this case as a legal term or as a technical term, can you explain ? – John Peter Feb 27 at 10:11
In legal terms "External user" must not be a paid employee of the company. Technically there is no relevance, I would say. User may sit wherever. – Jussi Palo Feb 27 at 12:57
thanks for your reply and clarification – John Peter Feb 27 at 13:41

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