A DisklessWorkstation is just that - a computer that has no local disks. It normally implies some sort of network booting (PXE, TFTP etc) to get the boot image, then booting and mounting its root FileSystem over NFS or from a RamDisk image. Modern network cards have PXE enabled bootroms on them already - the Intel EEPRO/100 and recent model Realtek 8139 chipsets are examples of these. Alternatively, a floppy disk can be used to bootstrap the system, which then does a network boot; or a live-filesystem cdrom such as KnoppixLinux can be used.
There's several good projects to set up DisklessWorkstations. LTSP is very full-featured setup, which involves a lot of application support. Its used by the K12 educational network in the US. PXES is another one, which is slightly simpler to setup, but doesn't have the range of support that LTSP has.
See DisklessWorkstationNotes for the lowdown.