I have a rookie question. Suppose we have a website (www.abc.com) on server 1 and a second website http://www.xyz.com on server 2 and the second website is referencing some files(css or javascript) on server 1. Can high traffic on server 1 slow down server 2?
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Yes, it is possible. You can read about something related, the slashdot effect at wikipedia, that explains real cases in an informative way.