A server is really that simple. In my home I have a small old computer that runs my firewall and has some space for file sharing. This way any computer I am on has access to internally shared documents. The myth perpetrated by the "big guys" is that you must have thousands of dollars in equipment to achieve a goal. This is not always true. Networking an office building with 50 computers does not mean you necessarily need a network much more complicated than an office with 5 computers. It is more dependent on what options and features you want.

Common uses of a server:

File Server - Share Files: 
This allows all computers (or some if you set accessibility options) to access files and/or change the files. This is probably the most common use of a server by small businesses. At L2 we use these to pass customer quotes, new product info and corporate documents from each department. This is also good for backing up your files in case of workstation failure.  

Network Server (LAN Server) - Manage the network:
This option gives you greater flexibility over your workstation computers and how they can use the internet connection. You could censor sites, internal computers and servers and/or specific folders, add passwords, log and monitor traffic, add security options etc..

Application Server - Shares Programs:
This is similar to a file server but it will share programs instead. This will allow your workstations to access a database or software application without having it on the workstations themselves. You can also send out new updates to all your workstations. The server will only have to download the update once and then distribute it to all your workstations. This is a faster option then all your computers connecting at once to download an update.

Remote Access Server - Share Desktop:
This is a great tool for remote locations. You can log into your computer as if you were in front of it. You see the desktop and control the computer the same way you would if you were there.

Costs Involved:
The cost is the total cost of the solution, not just the cost of the equipment.  Who is installing and maintaining this equipment? You have to factor labor and the level of technical "know how" that is needed in the total cost of ownership. But servers can also save money. A technique we use for everything from engineering firms to gold farmers (gold farmers use automated programs to make money in video games, usually needing to run multiple copies of the game) is using a very powerful sever with multiple control stations. The cost per station is usually a fraction of the cost for a computer that would be needed, and having this "super computer" actually can boost productivity allowing massive files and projects to be a snap.

Make sure the equipment you buy adds to the solution and/or has other value added features for your business. Like the above mentioned "super computer" helps with rendering for the engineering firm, saving huge monthly bandwidth costs to outsourcing. This is a total solution.   

The largest cost involved for most small businesses is the operating system that runs the server. No one ever mentions that these can run on XP or Vista! Microsoft server is very expensive and Unix based Operating Systems require more technical knowledge then most small businesses have access to.  The cost of the equipment is usually about as much as a high-end computer.  

How powerful of a server do I need?
This all depends on two things: The server's task, and how many people will access it at the same time. Generally servers are made so that multiple people can access them at a time, otherwise a workstation will suffice for most tasks. Even a simple word processing program, when accessed by 50 people, can become a resource nightmare and bog down the network. 

The Myth of Servers:  
The biggest myth is that you need all this stuff they try to sell you. If you are an enterprise corporation that needs high-speed file sharing over WAN for 10,000 users, then you may need some nice stuff. The average small business can run their server needs on a computer. Firewall, print servers and basic network routing can be handled by a decent switch. Light use file sharing can be done from most decent workstations and there are always hosted options for your email and communications that can be much more cost effective.

Another myth is that you can buy an older system and it will complete all the functions you need fine. Think of a server like an extension cord, it has to be able to pass enough electricity (or let enough data through) to run everything. A network is only as powerful as its weakest link. Running a low-end server for network management may slow your entire system.

The final myth is usually from the technical literate. They advise you put FreeBSD or some shareware OS on it, while there are some very nice free/low cost operating systems, they are all complicated. In the event you need to make changes you could pay as much in technical support as you would to buy a more user friendly OS. Don't buy more then you can manage in-house. This is were hosted/managed solutions become a fantastic option.