Im not sure if there is anywhere on xbox that would allow for a dedicated server, but my roommate was talking about it for PS3, how they are are allowing them to be networked and what not, so a dedicated server there would be to have lets say 4 PS3's networked and signed on without anyone actually playing ON those PS3's but allowing others to connect threw them.

In the PC world for lets say Counterstrike, people purchased/rented said dedicated servers or purchased high-end computers themselves and connected them to the network with only the server running for best optimization.

Difference: Once again it all depends on the dedicated server, it could be worst but generally is better than other servers since those who want the server generally set it up for optimized connections to allow for less lag among those playing on those servers. Dedicated servers are also normally up 24/7 with set rules in them to run all the time, for example removing a certain map from the rotation or having certain maps load twice as often to changing gravity, dedicated servers allow for the owners to set their own rules up and have them actually be the law of that server.

Once again Im not sure if you can get one for xbox, but if anyone knows how please do share.