TrevorKohlman & SaraGonc The testing refers to any DR drills that you would perform periodically to determine that your DR plan is valid and it will work in case of a true disaster. Please talk to your Account Executive or Licensing Specialist to determine if your specific DR test scenario qualifies for the benefit if you want to validate specifically for your environments. All the SQL Server HADR common options are listed https://docs.microsoft.com/en-us/azure/azure-sql/virtual-machines/windows/business-continuity-high-availability-disaster-recovery-hadr-overview for Azure Virtual Machine.
From our https://www.microsoftvolumelicensing.com/Downloader.aspx?documenttype=PT&lang=English:
Customer may also run Primary Workloads and its disaster recovery Fail-over OSEs simultaneously for brief periods of disaster recovery testing every 90 days, and around the time of a disaster, for a brief period, to assist in the transfer between them.
sybadm For the first part of your Q, please refer the above comment. When you switch between production and DR environments, you are leveraging your License Mobility Software Assurance benefit and reassigning licenses from production to DR. You can do this reassignment any number of times with Software Assurance.
petervee For your example (Azure VM with SQL Server (EE/SA) with 16 cores for primary, and secondary with 16 cores (no readable secondary, active/passive). Would the benefit cover this scenario (no on-prem)? Or, would all 32 cores/vCpus need to be licensed?):
a. If you are running this setup on Azure VM or on-premises, you would not need to license the secondary replica as long as it has 16 cores or less and the replica satisfies the condition of a passive replica.
b. The benefit that you would leverage would be the fail-over server Software Assurance benefit. If you add a third replica with 16 cores which is passive but is set for async data movement, then that would not need to be licensed under the new failover server DR benefit.
c. If you are running on-premises, and set up a fourth async passive replica on Azure VM for 16 cores, then you wouldn't need to license the SQL licenses on the VM due to the Failover servers for disaster recovery in Azure benefit.
HTH