Let me explain it to you step by step.
FileUpload1.PostedFile.FileName
This actually gives you path of the uploaded file.
But in all the newer browsers (FF 3.6 series, Chrome, IE7+) this feature has been disabled due to security reasons. Any website should not need path of a file stored in client's systems because that gives the directory structure and may expose other important things to website owner.
So in your case, the above code returned only the file name.
Now when you added
Server.MapPath
to the file name, it maps it to the corresponding physical directory on the server. So it is giving you a server path.
Hope that makes it clear.