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.