Originally Posted by HarryT
If you run out of "slots" for registered devices, you contact Mobi and they manually remove the "obsolete" ones for you.
There is a difference in that MOBI does not have a download limit but rather a "slots per ebook file" limit (which can be any number up to 4). When mobipocket removes a device PID from its list all future ebooks will have the new list and you are free to redownload existing ebooks with the new list. So, getting the new device list onto old ebooks is the owners responsibility and requires nothing from MobiPocket except the ability to redownload the ebook.
Amazon is using the same MOBI format, but it only ever uses one PID per file. So each ebook file is locked to exactly one device, and Amazon's server tracks which ebooks have been downloaded to which devices. If a device is deregistered, then this is trivially active for future ebooks but the server software must actually update a database to deregister each existing ebook individually. Based on the comments, it seems that this either never works (i.e. isn't automatic at all) or perhaps only works sometimes. There is no way for a user to tell, because the number of "slots" available and used is not exposed on the "manage my Kindle" page. Since six devices is a generous allowance, most users won't hit the limit even if they have to exchange a Kindle or two. Many more users will hit the limit over time, so this is something that Amazon has to get right.