From:
http://msdn.microsoft.com/en-us/library/ms188315.aspx
The scope of impersonation is explicitly defined in the statement.
The specified principal is specified as a LOGIN, a server-level impersonation,
or as a USER, a database-level impersonation.
Thus making the 3rd answer a correct answer.
So then an individual who is a sysadmin logging in would not be impersonateing anything at the server level contrary to what I understand the reference above to mean.
Comments anyone - or any one care to explain it in very simple words that I can understand.