I'm a great fan of Dizwell and have saved some of his valuable articles when I first saw them in the web. I'm posting it here so that the entire community can read through it and get the basics right.
Courtesy: Dizwell the great..
What is an Oracle Server?
When you edit a document in Word (or whatever word processor you happen to prefer!), you don't type documents directly into a disk file, because doing so would be painfully slow. Instead, documents are initially 'typed into' and created in memory -your computer's RAM- because that works at nanosecond speed and is thus very fast and responsive to work with. Unfortunately, most of today's RAM is volatile: switch off the computer's power supply and you lose the lot -and if you've ever been typing a long, complicated document and had a power cut before you remembered to save it, you'll know the sinking feeling of your brush with volatility!
To protect against data loss like that is why you're supposed to do a periodic 'File -> Save', of course. Hard disks might be slow and painful to use for constant access, but they make a fine permanent store of things which have initially been created and worked on in RAM. Saving a document in Word simply means 'transfer a copy of it out of volatile memory and onto permanent disk storage'. In this way, your word processor lets you combine the speed of RAM with the permanence of hard disk storage. You therefore end up getting the best of both worlds: speed and safety.
In fact, that goes for any program you care to mention, be it a word processor, a video editing package, a media player, whatever: data is read from its permanent store on hard disk and manipulated and worked on in memory, because one is fast but volatile and the other is slow but safe.
The Oracle Relational Database Management System (RDBMS) is just another program in this respect, because it does exactly the same thing. The data it manages is stored permanently on disk but when someone wants to update it, view it or delete it, it is loaded from disk into memory and it is in memory that all the data manipulation takes place. The permanent store of data on disk is what we call the Oracle database. The chunk of RAM where the database's data is actually worked on is called the Oracle instance.
The relationship between an instance and a database is one-to-one: if an instance has accessed the data from database X, it cannot also access or work on the data from database Y. If you want to work with the data from database Y, you will need to use another instance entirely. This relationship -one instance manages only one database- is always and completely true.
The relationship the other way around is not always like that, though. In an advanced configuration of Oracle known as a Real Application Cluster (or RAC for short), it is possible for one database to be accessed by two or more instances, simultaneously. That's usually done to speed things up and get more work done. But even so, each of the participating instances in a RAC can only be used to store and work on data from one database. So the rule can be more fully stated as:
one instance can only work on one database,
but one database may be opened by many instances
An Oracle Server is nothing more, therefore, than a computer onto which the Oracle software has been installed; on which an Oracle instance is running in memory (providing fast but volatile data management capabilities); and on which an Oracle database has been permanently stored on disk.
Users connect to the instance (not the database, note) and make requests to see or to manipulate data from the database by issuing SQL statements. In response to these SQL statements, the Oracle program loads the requested data into the instance. The user continues to work on the data within the instance. Occasionally, to make sure a power failure doesn't cause the loss of all the work users have been doing, the Oracle software performs, in effect, an automatic 'File -> Save' and writes the data stored in the instance back to the physical database on disk. In this way, users of an Oracle database get all the performance advantages of working with things in fast RAM, but all the permanence and safety advantages of having saved stuff to disk.
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