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Since we are in a hardware forum:
A server is a computer (in most cases nowadays based on PC architecture) which is constructed for high stability, fast data throughput (processor speed and/or disk speed) and unattended operation.
It's uses are manyfold: you can run your web-server (sic!) software on it, for example, or your file-server (there it is again) software.
Some vendors try to make it special... but after all it's just a plain PC.
Not really... If you purchase a server (I mean *real* server), you'll have things such as RAID systems, with hot-swappable SCSI drives, redundant power supplies, even hot-swappable CPUs (a la Sun Systems). Essentially any system can be a "server". It just depends on how much you care about what you're serving up.
You wouldn't want to run a 6GB Oracle DB which needs to be up 24/7 on a beige-box that you bought from the computer store down the street and built yourself. Sure, you *could* do that, and likely it would work, but personally, I wouldn't be able to sleep at night, being worried about "What if the power supply just died, and no-one can log in?"
It could also boil down to what kind of OS you run on the box. For example, if you try to run Windows XP pro as a server, you will have a limitation of 10 tcp ip connections. (Microsoft wants you to buy their server OS vestions if you wanna run a server).
IMHO, I believe that the OS you choose should be determined by the tasks it will be performing, and which of the OSes does that job better. This can of course be outweighed by usability, support and so on.
As for Windows XP being limited to 10 TCP/IP connections, is not quite accurate. If that system was limited to 10 TCP/IP connections, your system would be unusable even before you saw the login screen (think DHCP, Netbios/NetBEUI, etc). The 10 connection limit you're referring to means Windows is only able to accept 10 incoming File Sharing connections, so essentially only 10 users, or computers can access a share on your XP Pro box at a time. This has been in the NT series of Workstations since they were released. (NT4/2K/XP).
My 2 cents. ;)
Not really... If you purchase a server (I mean *real* server), you'll have things such as RAID systems, with hot-swappable SCSI drives, redundant power supplies, even hot-swappable CPUs
Add registered ECC RAM, 64 bit PCI slots, and loads more. They are built for reliability, the mobos are tested a lot more, are validated with a lot more other hardware, and they are just not comparable to PCs in terms of MTBF. Further, they offer scalability, integration with other equipment, and generally come with an SLA rather than a "warranty".
And why are you guys talking XP Pro for servers? There are Windows server operating systems for servers.