Advantages:
Ideal for a large number of files. According to a post made by Buck Hodges, you may want to consider using a server workspace if there are more than 50,000 files involved.
Compatible with previous versions of Visual Studio. While users go forward with the transition to Team Foundation Server 2012, it’s highly probable that some users will need to continue using Visual Studio 2010 and if this is a case that might occur in your environment, you may want to continue using server workspaces if a workspace needs to be shared.
Exclusive locks are observed (provided that the asynchronous check-out feature is not enabled).
Local files are not set to read-only and changes can be made.
All normal functionality is available. For example, you can create a new file and it would be recorded as a pending change.
If a change is made to a file outside of Visual Studio, it will be detected.