In the so-called network mode you have to connect to a remote server, as you describe, typically through a socket and so your client asks the server to do certain task, the server carries out the task and responds to the client.
In this mode, it is customary that the client and the server will be different nodes, that is different machines, running independently.
But what if you wanted to run you client and your server in the same machine? Even in the same virtual machine? Would it make sense to go through a socket to ask your server to do something?
That would be like using Skype to chat with a friend sat right by your side, to simply ask him to go have lunch.
So, ideally, in these cases, you should be able to run your application in non-network mode. That is, instead of going through a socket, you access your sever object directly and ask it to do something for you. Since your server object is located in the same virtual machine as your client.
Evidently, for you to be able to do this, you need a good design that exposes your server functionality through an interface, and your application uses this interface to interact with the server. When you are running in network mode, you use an implementation of this server interface that uses a socket (or RMI or whatever you do for network communication). When you are in non-network mode, you get an implementation of the server object itself.