Failover clustering exists on top of a Windows cluster. When a server, resource, or cluster-aware application within the cluster becomes unavailable, its work is automatically transferred to another server that is available within that cluster, minimizing system downtime.
If you go to a multi-instance environment, be extremely mindful of SQL Server Max memory and configure memory with the worst case scenario of all instances running on one single node/server in mind.
For more information on failover clustering, see the following Microsoft documents:
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Getting Started with SQL Server Failover Clustering (Microsoft Docs) at http://msdn.microsoft.com/en-us/library/ms189134.aspx.
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SQL Server 2008 Failover Clustering (Whitepaper) at http://download.microsoft.com/download/6/9/D/69D1FEA7-5B42-437A-B3BA-A4AD13E34EF6/SQLServer2008FailoverCluster.docx.
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Clustered SQL Server do's, don'ts, and basic warnings (KB article) at http://support.microsoft.com/kb/254321.
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SQL Server 2012 AlwaysOn Failover Cluster Instances at http://msdn.microsoft.com/en-us/library/ms189134.aspx.