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Types of Servers
There are multiple types of servers--file servers, print servers, database servers, web servers, network servers and application servers. A basic personal computer running Linux can function as one type of server or multiple types at the same time. For instance, you can have a single PC running as a file server, print server and streaming audio server all at the same time.
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The more traffic that your server will handle, the more resources will be necessary. You can create a simple home on older hardware, but if your traffic will be heavier than just your family, you will probably want a larger CPU and as much RAM as you can cram into the machine. The size of the hard drive will depend on the amount of data you plan to host.
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The type of server you decide on will determine the software you want installed. If you want a file server, you will want Samba and ssh installed. A print server will need Samba and CUPS. Apache HTTP server will be needed if you want a web server.
Unless you are creating an application server, you will not need office suites, games, graphic software, etc. It is a good idea to remove these applications. Removing the unnecessary applications deters other users from using the computer for something other than what it's designated for. It also frees up resources and disk space. When you are finished configuring the software, you should even turn off the X-server. You can always turn it back on if you need to.
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Your server will need to be secure, no matter what you are using it for. Make sure to close any unused ports and install and run anti virus software. Also, consider severely limiting the number of users who have root access and disable remote root access. If you absolutely need to give someone the ability to change the system, consider placing the user in the /etc/sudoers file so that they never have to have the root password.
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As you can see, there is really nothing mysterious about a server. It is simply a computer that's purpose is to serve data or applications. What makes a server a server is the software installed, not the machinery.
Look around the Linux channel here at Bright Hub and you will find many articles with detailed instructions on how to create the different types of servers on any computer.