Benefits
A server farm improves the reliability of Internet-based systems because it eliminates many of the single points of failure that are possible in a single server system. For example, with a server farm you could have two or more web servers supporting your Internet site. If one of the servers fails your throughput might be impacted to some degree but the site would still be available on the second server. In a single server system your site would be offline if this happened.

The throughput of a system can be vastly improved with a server farm because you can put a load balancer in the system that will send traffic to the least busy resource. This also means a server farm can handle huge swings in volume that may occur during the day.

A server farm also makes it much easier to troubleshoot systems if properly configured. Instead of having many different items loaded on one server you can put similar programs on each server so it is easier to determine if a problem is related to an application, database, bandwidth, etc.

Issues
The drawback to a server farm is you have to know what you are doing. A server farm done right is easily scalable and easily maintained. A server farm configured wrong is a nightmare you don't want to experience.