Datacenter proxies live on servers — fast and cheap. Residential ones are addresses of real users at ISPs. Sites trust residential more: they look like real people. But they cost more and are slower.
What datacenter proxies are enough for: scraping, site checks, automation. Residential are needed where anti-bot is strict: social media, ad accounts, hard scraping. The difference between residential and server proxies is site trust level.
Practical advice: start with datacenter proxies, they solve 80% of tasks. Take residential when the site starts blocking server addresses. Mobile are a separate category, even pricier, for the hardest cases.
In any case the key is a live pool. A dead address won't save even residential status.