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A game server (sometimes host or shard) is a server which is the authoritative source of events in a multiplayer video game. The server transmits enough data about its internal state to allow its connected clients to maintain their own accurate version of the game world for display to players. They also receive and process each player's input. (Wikipedia)
DDO currently has 8 distinct persistent game worlds (servers) (see list). Additionally, there are the test/preview servers, Mournlands (internal) and Lamannia (public). It is assumed that all game servers reside in Needham, Massachusetts.
Each server is a distinct game world. Your characters cannot see or interact with anything that happens on a different server. Your shared bank and the shared platinum vault is also restricted to characters of one server; so is the Auction House and in-game mail. Transferring characters across worlds is a paid service (see FAQ).
Your game account allows you to access all live servers, as well as the Lamannia test server. Your Turbine Point balance (but not your Astral Shards balance) is server-independent. The benefits of your account type and account upgrades purchased from the DDO Store (such as adventure packs or premium races/classes) are available on all servers. In contrast to that, any perks that you unlock by favor are restricted to that particular server.