Well, let's say you have a web site you've written using
Java technologies such as
Servlets and JavaServer Pages. The server-side is a web container running that Java code, and the client-side is a web browser such as Internet Explorer or Mozilla.
If the XSL transformation is made on the server-side, the client (web browser) receives a HTML document because the transformation from XML to HTML was made before sending the outcome over the network.
If the XSL transformation is made on the client-side, the client (web browser) receives an XML document which refers to an XSL document and has to perform the transformation himself.