bitcoin core – What does setting the “-server” flag do?

I am working the GUI model of Bitcoin Core. However I need to additionally be capable to work together with bitcoin-cli in my home windows console. Apparently I must set the -server flag earlier than working bitcoin-qt, or set “server=1” within the config file. (I discover I may also tick a field within the GUI that claims “Allow RPC Server” – I suppose that does the identical factor?)

However I do not perceive what that is really doing behind the scenes. What does it imply that its working as a “server”, versus not being a server?

Are there any downsides to doing this, notably on the safety/privateness entrance?

Additionally, I am curious as to why I am required to have a username/password if wanting to make use of bitcoin-cli?

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