OK let me give you a couple of examples of where you'd want these...
First off, you'd want a rackmount server because you can store them 23u high, really conserving space (you should see my company's data faucility, even with rackmounts it's huge).
-A company has a large database of customer information-- Everything from credit card billing info, to personal info, to past customer service issues, to past purchases, results of surveys, etc. You'd store it on an xServe, for dedicated access- that way you're not competing with other department's servers for bandwidth.
-A research lab has teraquads... oops, um, hundreds of gigabytes of data... And they need to be able to search and access it quickly, from many locations. So they pair up 10 xServes with 10 xServe RAIDs, providing a fast, secure, and safe data storage solution.
-A school has network booting on their iMacs, and students have their own profiles on the network that they can access from any of hundreds of computers. Since they have a lot of stuff, and need many connections at once, they get two xServes, and spread their accounts across the two. They don't even need monitors to run-- Just to be left alone in a closet. Which is good, because schools don't have the manpower needed to maintain large IT bases.
Hope this gives you a better feel for things...
pnw