I've used it both ways. Using SQL licensing is much easier for someone already used to that. You can't do much with standard SQL tools (ex: Management Studio) while using an Azure SQL Database. You have to use the web interface. Backing up is different, restoring is different, designing tables is different. Copying databases from a local SQL instance to a SQL Azure is not straight-forward like copying a .bak file and restoring it and there are features in standard SQL that aren't supported in SQL Azure.