My naive view, not thinking about what IS but how things SEEM, is that our clients get sent a TV screen view of whats going on on the server, and that what's going on on the servers is a super complex 3D version of the whole grid, with all the objects textures , and all the avatars clothings and movements , all the sounds, all the chat, all there in one place , with all the stuff we all see on our systems being there but all on one computer.
This would be somewhat like what would be going on if what we were doing was watching on our home screens the goings on in vast weather simulator that was running on a massive supercomputer doing a super detailed simulation of 3D weather patterns which was actually being displayed in 3D using some sort of holographic display sysem.
Note that I don't say that this has anything to do with what is actually happening on the servers, just that thats what the dumbbell hey-its-all-magic part of brain likes to see SLs workings.
I think the reality is somewhat the opposite of that, the server deals with things it needs to, like collison detection, and ignores the rest, like what color the avatars clothes are. The closest one can come to "the giant computer where the whole simulation is going on" is the complete network of all the machines in the Linden server location plus all our home machines" all put together.
I wonder if other people have this naive view that I expressed above but don't realize just how wrong it is?
For example, people seem perplexed when they hear the small memory in use on the servers. Why does it seem like they should need a huge amount of memory? I suspect that people may be thinkin, or feeling, that the servers are doing something like "all the work that is being done by each user in the sim's computer at home" plus some kind of "tieing it all together and doing the physics" when the truth is that the server is only doing the latter and that doing the tieing together, physics, collsions, etc. doesn't require that much memory, although it does require a lot a calculations.