Knoppix Terminal Server Works.....How ???

[GCMartin]

@Krishna...Thank you again for the way you've handled you explanation in this Thread.

I understand the operational things that are happening. This is a very very good solution to serve out a OS to a local machine (if I understand this correctly). which leads me to 2 remaining questions
#1
After PXE and the PC is running -Is the desktop I see on the local PC or is it being "served" from the remote server (ie. terminal server)?

#2
On the networking side - How was the PXE machine able to "find" the Knoppix server to answer this request (my confusion lays in that I, heretofore, thought the address for PXE came from the DHCP server)? Was this via a broadcast without an IP address?