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How many websites can you track with this package?

This is for 1 site.

Should it be one site for the whole year or can I swap for another every few months?

It's the site that you set up the plan with. I haven't created the feature yet that lets you swap plans like that but I probably will at some point.

What's the definition of 1 site, is it one domain (does it include subdomains) ?

It's basically equivalent to the definition you use with your analytics package (Google Analytics, etc.).