Windows Server is XP with knobs on.
There's Enterprise, Standard, Data Centre and I think a Web version.
Windows Server can run Active Directory which is a way to manage (badly) many many Windows users and access to Windows resources across a network. Enterprise edition will cope with more RAM and more CPUs and will run cluster services.
You generally need a Windows Server if you have a resource that lots of people need access to. For instance we have servers that host databases, act as internet proxies, deal with email and so on.
I've never used Data Centre or the Web edition but I think Data Centre has no GUI, not really sure what the point is and I would guess that the Web edition is primarily aimed at web servers.
Invariably most things that can be done on Windows Server can be done with other operating systems and quite often better. For instance Linux is widely regarded as being a more efficient and reliable web server than Windows could ever hope to be. Microsoft's Active Directory is a complete ripoff of Novell's eDirectory and a poor one at that.