I have a server hosted at my end, I am monitoring the server with pingdom and also my router. Strange thing is the response time towards the router is fine, but when the traffic flows towards the server, the response time became relatively high. It's more than 1000ms. Can anyone help me with it?
You don't specify what type of check you have Pingdom performing. However, my guess is you are doing an HTTP check. In this case Pingdom issues a full HTTP request for your site and the response time is the total time of the request to be sent, received, acknowledged, and for data to fully transfer. So the 1100-1200ms you see is the combination of the request as well as the total amount of time it took for your site to "load" on the Pingdom virtual browser/server.
Given that and the lack of information you provide this all sounds about right, 1.1 to 1.2 seconds to fully load.