I think I may be able to shed some light onto the inner workings of SL using pizza as an example.
Step into Phil's Pizza Emporium with me....
As you can clearly see the pizza (SL) starts off as raw dough. The dough is the land. Everything else in SL (the pizza) has to sit on this dough (the grid). Here we see LL creating a new continent (a bunch of pizzas). Notice that Philip is slinging sauce onto each of these pizzas (sims), the sauce will represent scripts. If the sauce is applied too heavy, the pizza will lag (droop). If the sauce is not prepared right it will also ruin the pie. Too much oregano (open listens), and the pizza will suck.
This pie clearly demonstrates how SL is divided into sims (pieces of pizza). Notice the grooves between the slices. These rifts are sim borders. Toppings are frequently lost in these borders where sims adjoin one another. We shall consider the pepperoni as avatars. Notice that they sit on top of the sauce and the land.
The cheese is the asset server. LL takes the cheese and grates it into tiny pieces and distributes it randomly across the grid. It is gooey and delicious. Pizza needs cheese. Cheese is the lifeblood of SL. Notice the burnt edges.
Also notice that this pie is divided into 8 slices (sims). If this pie were to be sliced into 16 slices, you would not have twice as much pizza (resources). This is a common misconception. There are two ways to get more pizza. The first would be to get a larger pie, as shown below:
This method isnt very practical, but you get alot more pizza per slice.
The other way would be to order multiple sims as shown below:
Here we see 13 servers, stacked horizontally. Presently LL does not offer this option, but as we can clearly see from this picture, it has been tried.
Let's discuss the toppings:

We see there can be a lot more to the pizza (SL) than just the topppings (resources) that we have mentioned. The picture above clearly demonstrates the dynamics involved with maintaning the grid. Sausages are physics, too many and the grid (pizza) will grind to a halt (your intestines). Mushrooms are textures. Olives are bling prims, the grid can stand them, but who in the hell orders them on their pizza.
The above photo also demonstrates the ugly side of SL, anchovies. These should be abuse reported whenever you see these on a pizza. They are just gross. Anchovies represent griefers.
Now that we have seen the basic ingredients of the pizza, lets talk about the delivery (bandwidth)....
Regardless of how good uncle Phil makes a pizza (SL), if the delivery guy (your isp) screws it up, you are left with a cold pizza (lag). It really sucks when your pizza guy delivers to the neighbors and they pay for it and eat it. One can only hope they ordered anchovies(griefers) in those instances. Remember to tip the pizza guy, or else he will spit in your pizza (SL).
Before anyone complains that the pizza analogy isn't true to SL, I too realize that sims (slices of pizza) are not pie shaped. So the pizza below is truer to form to the SL grid:

It is a sicilian pizza. Square and thick. Pretty damn tasty as well. It's clearly visible that this pizza has all the same characteristics of the grid. SL is a sicilian pizza.
If you have any further questions, feel free to ask. Clearly I have a deep understanding of the inner workings of a pizza joint (SL).