What is 'Counts As'?
Counts As means creating a unit of your own and playing it using existing rules for something else. Its not to be confused with Proxying (which is a temporary substitution due in unavailability of models) instead Counts As is a deliberate and permanent arrangement. The gist of Counts As is where you like the rules but the fluff dosn't match up with the models you want to use.
Rules Dictating Model
The first way this can happen is because you have a a rules option that you want to include, but the army you have dosn't tie up with that option. A great example of this is my Iron Warrior Terminators: This unit was designed as a close combat shock unit and as such an Icon of Slannesh was a tactical 'must have', however such a thing didn't stick well with the serious siege based theme of the army, so instead I created one of the Marines with a sensor relay. My logic was that this extra information would give them a tactical edge in the field justifying the +1 initiative.
Space Marine Assault Terminators with Chaos Terminator Flamer and Chain Fist. Steam Knight heads from Maxmini. Sensor Relay uses half a teleport homer and a rhino sensor dish and banner pole.
Model Dictating Rules
The other way Counts As manifests itself is where you have a model and your wish to include, but the rules just don't cater for it adequately. Again for me a good example came from Tyberos the Red Wake. This was a model I was very keen to include in my Iron Warrior army but rather than making him a claw armed Chaos Lord, I played him armed with a Slanneshi Daemon weapon. I felt the extra attacks, instant death and possibility of hurting himself as a result balanced up better with such an aggressive model.
Tyberos the Red Wake from Forgeworld
The 'Rules' of Counts As
There is some discussion about Counts As and if its legitimate. Its worth bearing in mind that several codex's and army books outright suggest playing Counts As models and GW regularly champion good examples of Counts As in both the magazine and especially the daily web reports. Furthermore as long as you follow the 2 key principles of Counts As, there is no tactical advantage to them, as they are simply army list entries that already exist.
As for the rules themselves, firstly make sure the model is representative in terms of size and secondly make sure your opponent is aware of what your playing it as. This is especially important if the model can be a variety of things. Once again my Iron Warriors provide evidence of this with the below model from the Inquisitor range. This I either play as a Daemon Prince or Close Combat dreadnought. The model is the same base size as both of these options, the model looks suitably representative too but because of the dual use its vital my opponent knows what it is today as tactically they are very different propositions.
Kriegor Krax Thrash from GW Inquisitor Range
So there you have it: Counts As in all its glory. Don't forget you can use it to apply to everything from one model, to a squad to a whole army. Huge possibilities await.