You should NOT be deploying webapps by modifying server.xml. That's been discouraged since Tomcat 4 came out. Despite what the Tomcat plugin for Eclipse WST does. Tomcat 3 should be beyond dead by now.
When you deploy a webapp, you have to set up a context. The context defines the root URL for the webapp. You can deploy in several ways.
1. Copy a WAR file into TOMCAT_HOME/webapps. If you do this, the context name will be the same as the WAR file name (minus the ".war").
2. Copy an exploded (unzipped) WAR into a directory in TOMCAT_HOME/webapps. The context name will be the same name as the directory name. Copying straight into the root or TOMCAT_HOME/webapps doesn't deploy to "/", however, so you do need a directory.
3. (recommended) Create a Tomcat Context as an xml file. Store this file into TOMCAT_HOME/conf/Catalina/localhost/. This allows you to specify custom parameters such as a security realm, database connection pools and server-specific settings. Although you can also save this file as META-INF/context.xml within a WAR, this way makes it easier to customize the configuration without rebuilding the WAR. If you have both META-INF/context.xml and this context file, this one will override the one in the WAR.
4. (not recommended) Add context to server.xml. I already commented on this.
When you update a deployed WAR, exploded WAR or context xml file, Tomcat will detect the changes and redeploy the webapp after a short delay. That's another reason for not defining deployments in server.xml - it can't be dynamically updated.
Dynamic redeployment doesn't always work as hoped. Complex apps may need to be stopped and restarted in order to ensure that various bits and pieces get cleanly reset.