Server Components can fetch data without shipping that logic to the browser. They are useful for faster pages and smaller client bundles, but they cannot use browser-only state or events directly.
ELI5
Think of Server Component as a named building block in a big LEGO app. A React/Next.js component that renders on the server and sends UI output to the client.
In practice
Use it when you are mapping how the app is structured or explaining a feature to a teammate or agent. In practice, define the owner, input, output, and failure mode before you rely on it.