Does the MacBook battery cycle count reset when replacing a battery I've been reading up on battery cycle counts and checked out my current count on my MacBook (13-inch, Aluminum, Late 2008) - recommended maximum cycle count is 500.

I've had this laptop now for over 4 years and at the 2 year mark I had the battery replaced by AppleCare. The first time I checked out the cycle count was today and it's currently on 1004. Now my question is, is this the cycle count of the battery since I replaced it (as in, it reads the cycle count from the battery), or is it the combined cycle count (as in, it stores the count somewhere and increments occasionally)? My assumption is that it's the count of that battery but I have no idea how to verify this.

Either way, it looks like I need a new battery ;)
The cycle count is logged on the battery itself.

I've never actually dug into the idea to see the method or technology used to store the cycle count, however I do know this to be true thanks to personally refurbishing hundreds of MacBooks.  When checking over a MacBook's battery life in System Information / System Profiler I would often switch out batteries and check again, deciding if a battery replacement was worthwhile.  Once the battery is switched out you will see the cycle count (along with capacity, etc) change.  If you don't see it change then you either need to refresh System Profiler (command + R) or the second battery just happens to have the same info.

If you're curious you could always visit the Genius Bar at an Apple store and have them pop in one of their spare batteries that they use for testing.