http://appleinsider.com/articles/10...w_it_can_reenter_the_sever_market.html/page/1
Is a good explanation of what happened to xserve, basically not selling enough.
OSX Server has been dumbed down to the point where makes a good home server for managing homes with increasing numbers of iPhone/iPads and other mac's, it certainly won't be displacing Windows Servers in the Enterprise.
Apple has focused more on getting Macs to work in Windows environments at the front end as opposed to take over the back end as well. Seems to be working for them and they don't need the extra work of trying to compete at the back end, where slimmer, lighter etc isn't important.
The xserve is still capable server and if have the early 2009 then supports Mavericks. There are a couple of people here that use them still for impressive home environments, where they can have them racked and away in the basement where the noise and rack isn't an issue.
For a lot of people though a mini with an external disk system will do the job and if necessary buy two.
If you are looking for a home server to run OSX Server on then not a bad thing, could hold a nice central itunes library, profile manager to manage the iOS devices, serve quite a few AppleTV's dotted around the house. Provide RADIUS Server for the the Airport Extremes Wifi Authentication, Central Management for the Mac's in terms of updating etc, software installation rather then individually on each Mac etc, central file store.
Makes a nice home vmware environment as runs vmware esxi 5 and allows to virtualise OSX without any modifications.
They are still capable boxes however Apple doesn't seem interested in the Server market and the mini server does for many of the requirements for many people, so isn't worth it too Apple to continue to develop the rack mounted server