I've set up my linux server/router some four years ago now. Started as a simple DSL router/firewall, added a squid proxy, then DHCP and DNS (useful, since we have 8 clients in the house) as well as an NTP server.

Lately I've set up an OpenLDAP directory and Samba as a PDC with OpenLDAP as its backend to have central authentication for all Unix- and Windows-Clients in the house. The next thing will be centralized profiles that are stored on the server, but I'll need to get a gigabit switch first.

So in my case it's a mere infrastructure server to make life easier for everyone and especially for myself. Means a lot less work than administering all the clients manually. Of course you can do all kinds of other stuff. If you are into web development, set it up as a LAMP server. Or store your media files on it to be able to listen/watch from any computer in the house. Etc. The possibilities are endless. It only depends on what you want and what you are interested in.