The way it is determined is by database access. Full admins with database access cannot have playing characters. Their characters still do exist, but typically just for testing purposes if said testing cannot be performed on the dev server.
Some of us just have assistant access, or access to various tools that output logged admin events, and since we can't touch the database we still have characters.
Some admins eventually step down as an admin and return as playing characters, but this really depends, since admins are also capable of fully buffing up their characters and assets (and many do so :P). Yes, most admins started as players and eventually dropped their characters in order to focus on development instead.