I am going to buy a simple UPS which is basically a battery between
the mains and the computer.

Question 1: will the computer 'know'
when it's running off the battery even if it's only connected to the
UPS through the Power Cord, and

Question 2: can I get the cmputer to "shutdown -h now" or something
to that avail when it gets a battery signal?

I just want my server to shutdown nicely instead of a hard off to minisise
chances of loosing data!

Thanks,
-Riddick

Some UPS's come with installable PC software that will allow you to monitor your unit and shutdown after x seconds or minutes of no power. Belkin and APC are two manufacturers that I can think of, but I'm not sure they offer that feature in backup units less than 500VA.

Here at home, I use a 500 VA Belkin and was able to install the software on both my XP and Linux setups, and it works like a charm, no problem. I've tried with less success, however, to install the Linux software supplied by APC to monitor the 1000VA I have at the office, so be forewarned that it's not always easy.

You need a connection, usualy serial.
Depending on the quality of the UPS, you can just get the Computer shutdown, a better UPS can be checked for battery status, load and can be programmed to shutdown at eg. 15% Battery.
(Maybe you can send an SMS on powerfail.)

Depends all on you needs and budget.

fluppi's right...you can get UPS's that allow you to shutdown after a certain amount time, or when the battery level falls to a certain %, or if there's any kind of internal fault in the UPS. Some can even be set to send out an email to whomever, saying that there was a power failure. It's pretty cool stuff.