Each website, each router, server, computer, etc. has something called an IP, or Internet Protocol, address. When the Internet was in its beginning stages, there were no domain names. Just IP addresses. Think of the address on your house; same idea.
As things developed, so did the technology for routing things around, and domain names were born, as well as something called a Domain Name Service, or DNS. Now there are DNS "servers" on the "major backbones" linking the Internet together, and every server connected to the Internet, that has one or more services on it which need to connect via domain names, has DNS on it. It's how the Internet matches up domain names with IP numbers.
Second Life is also an Internet service. Every server they have open to the public has a unique IP address and domain name pairing.
Every region has an IP address/domain name assigned to it. Now here is where we get to the point of this post.
Before Linden Labs became obviously profit-driven, they had a very standardized way of allocating regions per server. For full-prim private regions, it was one region per CPU (in other words, one per machine, and per IP address). For Homesteads, it was up to 4 per CPU. I'm unacquainted with the known number of Mainland regions which were grouped together on one server.
Those numbers have changed quite drastically and not for the better.
Now, there are anywhere from 5, to 15 (a number discovered by someone today) regions on one CPU. This includes a lot of private islands grouped with Mainland, and vice versa.
My particular region shares a machine with 8 other regions, out of which at least two appear to be private regions.
Why did LL do this? It is very simple: They wanted to be able to declare the first quarter of 2010 to be their best yet. The easiest way to do that was to cut the most expensive expenditure: Hardware. The bandwidth is the same; the only problem is there are more regions competing for resources per machine than ever before (they're shooting themselves in the foot again, by firing 110 employees just prior to the end of Q2 just to raise the bottom line as well...but that's another story I'll leave to others to tell.).
It also makes it clear why they felt it necessary to start making noise about scripting. If you have 8+ regions per server, there IS going to be a "critical mass" at points where too many scripts could be a big problem.
LL still charges $1000 for setting up a brand-new region, but unlike in the past, this does not necessarily go for brand-new hardware that you don't share with anyone else. Besides, PCs and rack servers don't cost nearly that much anymore.
In the meantime, resolution continues to degrade, along with teleporting, sustainability of connection, and a zillion other important things that make SL work smoothly. If you don't think this is costing them money in the long run in lost revenue when people don't stay, or leave, then you don't understand simple mathematics.