Minecraft wiki entry for Requirements, associated text: Note that these requirements are for the server only. You need to allocate more resources to the OS!
Also note that these suggestion presume default settings in server.conf - i.e., a Draw Distance no higher than 10, and is also based on a new world; the bigger the world gets, especially if there's advanced redstone circuitry at work, the requirements - especially the RAM, or in the case of lots of redstone or mobs (in e.g. grinders), the CPU - increase significantly (to the point where a major world with several camps, redstone machinery, grinders, etc. can easily more than double the requirements).