1. What does a server do exactly? I've heard of them but never have known what they really do.
Short answer - it serves things.
Longer answer, it accepts requests from clients, processes the request and returns a result.
For example, a web server accepts connections from web clients (browsers) and returns the page the user requested. A DNS server accepts requests from DNS clients and returns the name lookup result. A mail server accepts connections from mail clients and delivers mail (either passing it on to another mail server, or storing it in a users mailbox), and so on.
2. Can you use a windows machine on a apple server? (I'm guessing no)
If you mean can a Windows machine be a client to a Mac server? sure.
All protocols (mail, web, DNS, file servers, etc.) follow a set of standards that define how the client and server interact (e.g. how the web browser makes a request to a server, how the server responds, etc.). As long as the client and the server agree on the protocol it doesn't matter whether they're all Macs, all Windows, all Linux, or any combination of any OS.
Therefore your IE browser running on Windows can interact with a web server running on a Mac.
Your Windows client can make DNS requests to your Mac-based DNS server.
Your Windows client can connect to a file server running on a Mac and upload or download files, etc., etc.
