This is how I understand it. They must have a proscribed rest time every day. This must be assigned in advance. The period involved is up to you as long as it meets the required intervals. And, probably most important to you, no you can't call them and assign flying during this period. If you did, then it was not rest. The FAR says they can not be available for work/duty should the occasion arise. I understand that it is much cheaper to to have pilots on call 24/7. Most safety rules do involve an additional cost to flight ops costs. If it didn't there wouldn't be a need for the rule. Everyone would be doing it anyway.

Anyway, that is the way I would interpret rest according to their definition. If you must be available for duty if the occasion (on call/reserve) should arise then you are not at rest. This is different from duty. You can reference the Whitlow Letter to see that the FAA does not consider on call to be duty but it is not rest either and you must have the required rest within the preceding 24 hours. In most scenarios this makes on call a defacto duty period. They have elected not to call it duty but that does not alleviate the required rest rules.

If I am incorrect, I would like to learn the correct interpretation. The FAA has plenty on this topic and it seems fairly straight forward. However it is obviously not straightforward as there is so much disagreement over this. I don't think this is something the FAA has really pursued in the past but I think they will in the future with all of the fatigue issues the NTSB has been pushing.

I know that I wouldn't want to have to answer questions about this if I had an accident/incident. Also, could an insurance company refuse a claim on a multi million aircraft if they determined that the aircrafty was flown in willful or mistaken violation of the FARs? That is a legal question that I am wholly unqualified to answer.

Anyway, I sincerely hope that we can eventually put this issue to rest by documenting the available references. I doubt it, because there is a lot of profit motive in bending this rule as I see it so there will always be a counter argument. I am very interested in seeing the counter argument supported.