Mode of operation of terminal servers
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Terminal servers allow to start several separated shell (desktop) instances on one computer (the host computer). If a terminal client connects to the server, it own user interface is assigned to it, which only it sees. All programs started on the client run on the terminal server. Only the screen information (graphical data) is sent to the client via the network. You can imagine this like a monitor cable lengthened by the network.
Only a small program runs on the client, which displays the graphical data sent from the server. No other software is running on the client. So the memory and ressources needed on the client are very low. So they are called thin clients.
Another advantage of the client: The client can be realized completely idependent from the operating system, because only graphical information is displayed on it. So there are terminal server clients for Windows 2000/XP, Windows CE, Linux, Unix, etc.