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Nano Server is an exciting new installation option for Windows Server 2016 that has an even smaller
footprint than the Server Core installation option.

Nano Server is a new, small-footprint, headless installation option for Windows Server 2016. It is a
deep refactoring of Windows Server that is optimized for the cloud. As such, Nano Server in Windows Server 2016 is ideal for the following scenarios:

 Compute Host for Hyper-V or part of a Windows Failover Cluster
 Container Host
 Storage Host for a Scale-Out File Server (SOFS)
 DNS server
 Web server running IIS
 Application Platform for apps that are built using cloud development patterns and run in a container and/or VM guest

Nano Server is fully headless; thus, it might require some changes to management and operations
procedures for organizations that aren’t fully managing their current server deployments remotely.

Windows Server customers have provided this feedback:

 Reboots have a negative impact on my business—why do I need to reboot because of a patch to a feature I never use?
 When a reboot is required, my servers need to be back in service as soon as possible.
 Large server images take a long time to deploy and consume a lot of network bandwidth.
 If the operating system consumes fewer resources, I can increase my virtual machine density.
 We can no longer afford the security risks of the "install everything everywhere" approach.

Nano Server addresses these problems by including just the functionality required for its proposed
use cases and nothing more. This minimizes the attack surface area, thus eliminating reboots and minimizing the footprint, which provides faster deployment and reboot time and frees up resources
for other uses.

Source of Information : Microsoft Introduction Windows Server 2016