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Technically, a "simulator" is a computer software package that runs on one of Linden Lab's servers, managing all of the basic functions for a region (or up to four 256 m X 256 m regions) of virtual real estate in SL.  In practice, most people use the word "sim" -- a contraction of "simulator" -- to refer to the server that the program is running on, and then also use it as a synonym for "region".  If you want to be very careful, though, you can make points with purists by using the words sim, server, and region properly. 

Read http://wiki.secondlife.com/wiki/Server_architecture#Simulator

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