VT Technology Blog: Free Hyper-V Server / Windows Server Core

"The Server Core option is a new minimal installation option that is available when you are deploying the Standard, Enterprise, or Datacenter edition of Windows Server. Server Core provides you with a minimal installation of Windows Server that supports installing only certain server roles. Contrast this with the Full installation option for Windows Server, which supports installing all available server roles and also other Microsoft or third-party server applications, such as Microsoft Exchange Server or SAP." (What Is Server Core? TechNet Library)

Full vs. Server Core

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Since the early days of the Microsoft Windows platform, Windows servers were essentially "everything" servers that included all kinds of features, some of which you might never actually use in your networking environment. For instance, when you installed Windows Server 2003 on a system, the binaries for Routing and Remote Access Service (RRAS) were installed on your server even if you had no need for this service (although you still had to configure and enable RRAS before it would work). Windows Server 2008 improves earlier versions by installing the binaries needed by a server role only if you choose to install that particular role on your server. However, the Full installation option of Windows Server 2008 still installs many services and other components that are often not needed for a particular usage scenario.
That's the reason Microsoft created a second installation option—Server Core—for Windows Server 2008: to eliminate any services and other features that are not essential for the support of certain commonly used server roles. For example, a Domain Name System (DNS) server really doesn't need Windows Internet Explorer installed on it because you wouldn't want to browse the Web from a DNS server for security reasons. And a DNS server doesn't even need a graphical user interface (GUI), because you can manage virtually all aspects of DNS either from the command line using the powerful Dnscmd.exe command, or remotely using the DNS Microsoft Management Console (MMC) snap-in.
To avoid this, Microsoft decided to strip everything from Windows Server 2008 that was not absolutely essential for running core network services like Active Directory Domain Services (AD DS), DNS, Dynamic Host Configuration Protocol (DHCP), File and Print, and a few other server roles. The result is the new Server Core installation option, which can be used to create a server that supports only a limited number of roles and features.

Why Is Server Core Useful? TechNet Library:

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So what are the benefits of running Server Core instead of a Full installation? There are many, including the following:

Greater stability. Because a Server Core installation has fewer running processes and services than a Full installation, the overall stability of Server Core is greater. Fewer things can go wrong, and fewer settings can be configured incorrectly.

Simplified management. Because there are fewer things to manage on a Server Core installation, it's easier to configure and support a Server Core installation than a Full one—once you get the hang of it.

Reduced maintenance. Because Server Core has fewer binaries than a Full installation, there's less to maintain. For example, fewer hot fixes and security updates need to be applied to a Server Core installation. Microsoft analyzed the binaries included in Server Core and the patches released for Windows Server 2000 and Windows Server 2003 and found that if a Server Core installation option had been available for Windows Server 2000, approximately 60 percent of the patches required would have been eliminated, while for Windows Server 2003, about 40 percent of them would have.

Reduced memory and disk requirements. A Server Core installation on x86 architecture, with no roles or optional components installed and running at idle, has a memory footprint of about 180 megabytes (MB), compared to about 310 MB for a similarly equipped Full installation of the same edition. Disk space needs differ even more—a base Server Core installation needs only about 1.6 gigabytes (GB) of disk space compared to 7.6 GB for an equivalent Full installation. Of course, that doesn't account for the paging files and disk space needed to archive old versions of binaries when software updates are applied. See Chapter 2 for more information concerning the hardware requirements for installing Server Core.

Reduced attack surface. Because Server Core has fewer system services running on it than a Full installation does, there's less attack surface (that is, fewer possible vectors for malicious attacks on the server). This means that a Server Core installation is more secure than a similarly configured Full installation.