Node.js server is works on event based models where callback functions are supported. But I am not able to understand how is it better than traditional thread based servers
When having a lot of threads you are going to have a lot of context switching which is going to be expensive. You want have this overhead when using node.js's Event loop
Context Switch
A context switch is the computing process of storing and restoring state (context) of a CPU so that execution can be resumed from the same point at a later time.
Event loop
In computer science, the event loop, message dispatcher, message loop or message pump is a programming construct that waits for and dispatches events or messages in a program.