Hi ncmm,
All of the specifics for the AppleCare coverage is itemized on their page and in documentation that is mailed to you when you active the plan on your computer. It is your responsibility to read it and understand it, if you didn't agree with it or found something in error then it is also your responsibility to contact Apple regarding it. So let's take it from the top...
*Under Section 1, Paragraph B (Limitation), Line item IX*
+(ix) Consumable parts, such as batteries, except in respect of battery coverage under APP for iPod or unless failure has occurred due to a defect in materials and workmanship;+
*
http://www.apple.com/batteries/replacements.html*
+Your one-year warranty includes replacement coverage for a defective battery. You can extend your replacement coverage for a defective battery to three years from the date of your notebook purchase with the AppleCare Protection Plan. However, the AppleCare Protection Plan for notebook computers does not cover batteries that have failed or are exhibiting diminished capacity except when the failure or diminished capacity is the result of a manufacturing defect. Apple offers a battery replacement service for MacBook Air and all MacBook Pro notebooks with built-in batteries. You can purchase replacement batteries for late models of Apple notebooks directly from the Apple Store.+
*
http://www.apple.com/batteries/notebooks.html*
+For Apple notebooks with removable batteries — such as previous generation MacBook and MacBook Pro computers — a properly maintained battery is designed to retain up to 80% of its original capacity at 300 full charge and discharge cycles. You may choose to replace your battery when it no longer holds sufficient charge to meet your needs.+
While it's very fun to be told that you need to spend more money on an expensive computer that you purchased AppleCare for, it's also important to understand what you're entitled to and what isn't covered before proceeding.