A “server” is just any computer serving up digital services through a network. It can be anything from a tiny IoT device (Raspberry Pis are/were popular amongst hobbyists) to a huge expensive specialized computer sitting in a data center rack.

Usually, the “service” is HTTP traffic (the web/internet/etc), but it can be anything.

It works exactly like any other computer, but of course after decades and decades of development, there is a huge variety of specialized hardware made for ‘serving’ up … all sorts of services. Specialized web servers, specialized database servers, specialized storage servers, specialized “AI” servers, etc etc etc. Many modern day services use several of these specialized devices together to provide services that can handle millions+ of users. While tying all those specialized devices together can get really complex, they’re still just computers that are really good at specific things.

The only thing that truly defines a ‘server’ as far as hardware is concerned is how specialized/optimized the hardware is for serving up those services.