The gap has closed a bit, however I firmly stand by Xeon being actual "server grade" hardware, manufactured with it in mind that it will probably be running 24/7. I feel the same way about SATA VS SCSI drives. I believe SATA, although is great, should be left to the home computing field unless you're offering budget hosting, which in that case, I can understand avoiding SCSI because of the price, however SCSI is clearly the server grade hardware, and SATA, desktop.
It depends quite a lot. The X3220 and the Q6600 are in fact identical, though it is not always the case. Aside from being marked as server-grade, they tend to have lower power consumption, and perhaps added instruction sets, though rarely the case nowadays.
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There are many differences. CPU sockets and chipsets are different, FSB speed, Clock speed, Power consumption and many more. I would suggest you to spend some time comparing processors in WIkipedia or any of the producers pages.
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Q6600 and X3220 are functionally equivalent. And hey, who would've thought, right now the X3220 is $15 cheaper at newegg.com! At the end of the day there are marketing and sometimes binning differences (i.e. voltage/power). And in general the trend continues throughout the 'single-socket server' market.
Only when you move to dual/quad sockets then you will see differences in sockets, and marked differences in silicon, e.g. QPI/HT links, power and thermals (a dual socket in a 1U demands lower power-consumption chips due to space and cooling constraints) etc
It's all about MTBF (Mean time between failure). Typically in memory, hard drives, and CPUs, server grade hardware has a higher meantime between failures. Server grade memory is also normally ECC (Has error detection/correction) while Desktop memory is not.
Sometimes you will see desktop CPUs relabeled as Xeons or vise-avers. Also, Server grade CPUs often times come with more L2 cache. I think in many people's experience at this time in history, the quality of Desktop components is pretty decent and can get the job done without failure. They are normally not redundant though, although SuperMicro improves on this a bit.