Connected applications are not stand-alone, they can work only if TC is launched and is running a script. So, you need to install TC on the machine where your Connected application works, and you need a license for this copy of TC.
As for limitations, code in Connected applications is fully functional. Anything you can do in TC is available in Connected applications.
You can find more information in the "Connected Applications" help topic.
I see, thank you, I was confused as to the way that it works. A shame actually. Being able to generate a stand alone .EXE by just including the reference to the TestComplete DLLs would be a VERY useful feature.
If this or any response has helped you, please reply to the thread stating that it worked so other people with a similar issue will know how you fixed your issue!
Unfortunately, there's no way to implement such a feature at the moment. Runtime objects used in scripts (such as Sys, Log, etc.) are not available if a script is not running in TC - they are registered at run-time only. So, there's no way to create 'completely' stand-alone applications.