Linux allows any reasonably new computer to be used as a server to a thin client, or many thin clients, these thin clients can be inexpensive legacy computers. For a console terminal you need a 386 with 4-8mb of ram, or for an X-Terminal a 486/66 with 8-16mb ram.
One Option is without a hard drive, it keeps the noise down and simplifies administration as you only have one system to maintain.
If you have legacy apps, you can have them on a hard drive with it's legacy Operating System
This howto is aimed at those new to Unix/Linux, it will cover the essential areas you need to be aware of and point you to other documentation in that area you need to be familiar with.
You will probably use this as an aid to the http://www.slug.org.au/etherboot/ documentation, I include some more examples of config files, and leave many of the other features of etherboot as an exercise for the reader
If your client is sufficiently powerful only the file system need be shared, applications can run on the client system. (say a 233 32mb ram). Install an application on the server and all clients have access