It will vary based on the game but generally servers would simply store data and verify inputs to make sure the clients are in sync and haven't been hacked for example. The clients get sent data like all of the players positions and update their internal state based on it.
No Man's sky probably does a lot more server side, as the world is persistent for everyone.
I think it's an option, but i'd like to get it playable (and fun!) first.
Roleplaying and creativity is pretty high on my list. For example I'm working on a Quest Design system where you can hook together anything in the world to create a quest.
A simple example:
You create a Wizard NPC with an input of (4) (Boars tusks) (which you link to the Boar's monster area). Once completed it unlocks the (Gate) next to him, allowing the player to access the tower full of loot. The inputs and outputs would be completely flexible and could lead to some pretty funny situations. Careful balancing would be needed so players aren't walking halfway across the map just for a shoddy Wooden sword reward.
Nice, gonna try it now. I hate that damn thing, and was dismayed when I couldn't disable it in Facebook's settings. Now if only I could do the same for the app.
Developers use the information to make the product better. They use crash reports to fix bugs without you having to report them and they can determine what operating system and screen resolution you're using so the next time you open up the app, it's been optimised so those ugly black borders have been taken care of.
Granted, they could ask your permission to do this, as some applications do. However, are you really going to spend time integrating an extra layer of complexity between your game, when you're on a limited development budget and the priority should be on making the game more fun?
I believe having this stated in the privacy policy, together with the privacy rules agreed to at installation is more than adequate enough for this level of application, anything more would be overkill on the developers part.
This is how analytics applications work. Almost every website you visit has Google Analytics installed, which sends your data to their servers so that the developer gets a better understanding of their users.
Apps aren't an exception, you'll find it in almost all of them. When you install the app it should notify you what is does or doesn't have access to, so things like your phone book and call history are not accessible for the app.
No Man's sky probably does a lot more server side, as the world is persistent for everyone.