If I want to use the community version on multiple domains (all on same server), each having their own look, should I install Magento on each domain or do I just install it once in the root of the server?
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install only one magento , create your stores, add store view code to your server as variable and point all domains to your ip address.
There's a couple of different ways to do this, but one way is to add your store codes within the index.php of your parent store - that's the main site that you have Magento installed on, from which you'll manage all of the additional ("child") stores.
You may find our guide here useful - it walks you through configuring the child domains in the admin area of Magento first of all, then highlights the changes you'll need to make to your index.php file. There's lots of references to the Plesk hosting control panel, but the mechanics of configuring your multi-store should be the same regardless of which panel provider you have.
I know you posted your solution last year, but I am working on adding multiple domains under the same Magento. My question is, will your solution work if I want to use the same checkout/payment modules across both of the websites? If not, how would I set that up?