In practice, any site that has the Drupal module enabled can function as a directory server. When another site pings the site, the remote site's name, slogan, and mission are added to the list of sites.
For example, you might use a directory server on a college or university where individual labs or departments are setting up many different Drupal sites. Each one could ping a central server at the university to compile a list of all the various sites as they come online.
In its current state, the directory server service lacks some basic features: the administrator cannot block a certain site from pinging and being added to the list, and the administrator cannot limit the incoming pings to a certain set of domains or IP addresses.
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