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The language server is a background server process which the editor (in this case VS Code) asks for content assist, hover info etc. The benefit of a language server is that it's compatible with multiple editors via the Language Server Protocol. You've installed the clangd VS Code extension, which is basically responsible for connecting the VS Code API to the clangd language server.
Yeah the docs might've been outdated, it's called "clangd" for me too in the dropdown. But if you see something like clangd version 13.0.0 (https://github.com/llvm/llvm-project d7b669b3a30345cfcdb2fde2af6f48aa4b94845d) in the beginning of the output and messages like --> textDocument/publishDiagnostics (which are LSP requests going between the extension and the language server) when editing C/C++ code, and no obvious error messages, I'd assume it's working.