A dedicated server is a server that is entirely dedicated to you. You shared the server with no other users (unlike shared web hosting) and your operating system of choice is directly installed on top of the hardware (unlike virtualization, e.g. virtual private servers). This means that you can benefit from greatly improved performance (no other users overloading the servers or stealing CPU cycles), as well as greatly improved reliability (no other users running the software causing it to become unreliable).
One of the most important points with a dedicated server is to choose a specification that matches your requirements. Typically, a modern server should have multiple cores so that multiple threads can be processed simultaneously. This means that a single threaded application or script can’t max out the CPU, blocking other processes. In terms of web server operation, the more threads available on the system, the better. This is why the latest Intel Core i7 ‘Nehalem’ processors offer such fantastic performance in this application, with up to 8 threads per CPU.