Right. X uses a different idea altogether from windows. Its designed so you could have multiple windows on the desktop, but with the programs attached to those windows running on different computers etc.
The X server is the program that manages the display of these windows, and input events.
An X client is a program that runs with the X server. i.e. mozilla, xterms, evolution etc. These could theoretically run on any machine, and just display the GUI on the one running the X server. Handy if you want GUI apps on a machine, but don't want X taking up resources.
If you want to learn more, I'd recommend you browse:
http://www.x.org/X11.html
There's plenty of information on the net. X is very complex at some levels, and its kinda beyond the scope of a forum post.