First, “state of the art”, with publications and recognition by professional societies. This is relatively easy to distinguish from a Senior, because the publications mount up.
Second, “state of the practice”, with extensive influence on major products/outcomes. The justification in this case usually comes in the form of testimonials like “X led the design and delivery of Y, and without him/her Z, for which Y is critical, would not have flown.”
This kind of person is harder to distinguish from a “solid Senior”. There is some resulting soreness among seniors who haven’t climbed to Principal. There’s a committee of Principals that gives recommendations but management makes the final call. Sometimes retention and organizational strategy are in play, besides just on-paper accomplishments.
Hiring directly into Principal does happen. The committee above makes a special out-of-cycle meeting to review such cases.
So, the difference between Senior and Principal can be in the visibility of the results and level of difficulty. The principal can still be the motor of a relatively small team - as small as 4 or 5 people - if the scope of the accomplishments is enough.
Specific numbers may be helpful. There are also two levels above Principal, Senior Research Scientist and (highest) Fellow. There are about 40 fellows in an org of 6000. There are about 250 principals. One of the fellows is Adam Steltzner, who designed the sky crane landing system for the Mars Curiosity lander.