A time server allows you to keep your computers' clocks synchronized with each other, and with an external time server that is ultimately tied to a veridical time source. Using time servers can be useful when referring to time stamps on files and in system logs. One of the more popular and powerful time server protocols is NTP, which allows for a time server (generally called ntpd or xntpd) to run constantly, periodically checking its notion of time against that of another NTP server. On a small network, you'll probably configure one server to synchronize itself to a stratum 2 server (that is, one that's two links away from a veridical time source), then synchronize all your other computers to your stratum 3 time server using ntpd or a client-only NTP program like ntpdate. A larger network might use multiple stratum 3 time servers or a veridical time source like a GPS clock.
Other options for handling time setting include the Linux rdate command (a time client) and the time server functionality in SMB/CIFS, including the Samba server and Windows NET command. You can use the latter to easily synchronize the time on Windows clients, without installing NTP software on them.