g1smd - 1:41 pm on Apr 3, 2011 (gmt 0)
The "path in URL" part is literally the bit after the www.example.com hostname all the way up to (but not including) the question mark before the query string (if there is a query string that is).
The "path inside server" is the location inside the server that will serve the content.
RewriteRule ^dogs /pets/cats.html [L]
When user requests www.example.com/dogs silently serve the file at /var/htdocs/pets/cats.html
Since RewriteRule can do pattern matching, the URL pattern is decided by the URL structure you use on your site.