Servers don't stop lag, like most people think. And they cost more money, and can be shut down, so you couldn't play the game after a certain time. (look at what happened with Battlefield 1943)
They don't stop lag, but judging from my experience, they definitely reduce it. I play a lot of Bad Company and BF1943 on EA's servers, and they have higher player capacities (24 vs. Halo's 16), with no host advantage and less wacky, lag-created antics (bullet drop, getting assassinated from the front and shot around corners, etc).