Working principle
A servo motor is not a distinct type of machine so much as a complete closed-loop package: a motor, a position or speed sensor, and a controller that continuously compares the commanded value with the measured one. The controller drives the motor with whatever current is needed to reduce that error to zero. Most modern industrial servos use a permanent magnet synchronous motor with a high-resolution encoder, while hobby servos use a small brushed DC motor, a gearbox and a potentiometer.
The feedback loop
The feedback loop is what separates a servo from an ordinary motor. Position, velocity and current are usually regulated in nested loops, the current loop being the fastest and the position loop the slowest. Because the controller sees the actual shaft position, it corrects for load disturbances, friction and manufacturing tolerance automatically. A stepper simply assumes it arrived; a servo knows whether it did, and keeps pushing until it has.
Torque, speed and dynamic response
A servo drive can briefly deliver two to three times continuous torque, which is what makes fast acceleration and short settling times possible. Rated torque is available continuously from zero up to base speed, and above that the drive enters field weakening and trades torque for speed. Tuning the loop gains sets the trade-off between response speed and stability: too little gain and the axis lags, too much and it overshoots or oscillates.
Where it is used
Servo motors run anything where motion must be accurate, repeatable and fast: industrial robots, CNC machine tool axes, pick-and-place machines, packaging and printing lines, and camera gimbals. Small hobby servos with a PWM pulse-width command move RC surfaces and robot joints. Compared with a stepper the servo costs more and needs tuning, but it does not lose steps, runs cooler at standstill and holds its accuracy at high speed.