A headless server does not render any visuals, and there is nobody playing on it locally. Where a listen server represents a player hosting a game on their machine, a dedicated server is a server that runs headlessly. The server then replicates changes out to each connected client so that all players experience a very close approximation of the game being played on the server.
The true game state is moderated by the server, while each player controls their pawns remotely with an autonomous proxy. The server-client model used by Unreal Engine represents network multiplayer games with one server acting as the host of the game, and players joining that game as clients.
Launching and Testing Your Dedicated Server
