Bitcoin.conf & JSON-RPC options What does it mean in the bitcoin.conf file when it states:

  server=1 tells Bitcoin-Qt to accept JSON-RPC commands?  


If all one needs to do to solo mine is type setgenerate true in the console, then what is at stake with accepting JSON-RPC commands?  Does this allow other software to interact with Bitcoin-Qt, or something akin to that?  Can someone explain?
The JSON-RPC API can be used by other programs to communicate with the Bitcoin client.  That could include external mining programs, "e-commerce" software to automatically make and receive payments, or any other software that wants to interact with the Bitcoin network.

It is true that you do not need this feature simply to solo mine using setgenerate true.  However, you should be aware that setgenerate true enables an inefficient CPU miner which is obsolete technology and should be used for testing only.  It will cost you far more in electricity than you can ever expect to earn in mining revenue, and with very high probability you will never successfully mine a single block.  The current state of the art in mining is dedicated ASIC hardware.  Such hardware would normally be controlled by a separate piece of software, which would then communicate with the Bitcoin client over the RPC API.