Anyone has a link for basic understanding and implementation of Exchange Server.
How does it work?
If Exchange Server is planned to be set up on a separate machine, how does the active directory of the main server comes into the picture and how is it used. etc.
If anyone has any tutorial or link to a tutorial for that matter, please state. much appreciated.
The links above seem to cover the basics. Let me know if you need any specific help with Exchange.
As for AD knowing where the server is... the directory is prepared for the Exchange server before it is installed. In AD all the computers are recorded and the services they provide. Hence objects can be properly addressed. Hope that answers the second part of your question.
Good stuff. As TofiBaba said, Exchange2003 and Windows2003 server are integrated and work closely with each other. Make sure you configure AD properly and then configuring Exchange is real easy.