When I login to websphere portal console and go under Servers -> Application Servers --> I see two servers listed: server1 and Websphere_Portal. Why are there two servers? There is only one portal server here.
You're right there is only one Portal server, but there is a second server there. If I recall correctly server1 basically just runs the admin console. It doesn't have Portal running on it.
Quote from some change notes for version 8,
In previous releases, you needed to start WebSphere Application Server server1 before you can start WebSphere Portal. server1 was also needed to access the WebSphere Integrated Solutions Console
http://infolib.lotus.com/resources/portal/8.0.0/doc/en_us/PT800ACD001/overview/change_portal.html