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And to further explain, the reason they are called 1U and 3U is because of rack space. When mounting equipment in telecom and AV style equipment racks, how "tall" your equipment is is measured in "U". I'm too lazy to look up exact specs, but each "U" is a little over an inch in height. So a 1U server is actually the same thickness as the players are. And a 3U is three times that tall.
K currently still sell a 1U and a 3U server and those have always been the same basic configuration as Mr. Poindexter describes. There's also an older 5U server that's now discontinued. I don't remember what it held in terms of drives, but I think it was limited to 750GB drives and has been discontinued long enough I don't think anyone recommends buying one these days for any purpose.
And you don't really HAVE to mount the servers in a rack, but many folks do, so that's how people have come to know them. But between the 1U and the 3U, at the end of the day it's all about disk space. There's no other functional difference I know of.
--Donnie