Virtual Private Server
VPS hosting is a service that gives you a web serverís hardware to share with others without sharing the software. This means that you can have complete root control over the server as if it was your own dedicated server but you will still share the CPU, RAM, and bandwidth with other users. You can still have guaranteed CPU, disk space, and memory. This means you can install whatever you want.
VPS hosting is more expensive than shared web hosting but it can be far less expensive than dedicated hosting while giving you some of the same benefits.
VPS hosting is great for hosting many web sites in an environment where you have almost complete control while still keeping your costs down. You can install a custom Apache module or try out a new programming language. You can get in a and make detailed changes using the command line or remote desktop but your hosting company still usually makes it easy to administer your site using a Virtualization control panel such as Virtuozzo Power Panel.
How VPS works
shared hosting server, problems with one website might cause the entire server to go down, causing all of the other websites on that server to go down with it. This would not happen on a VPS machine because only the problematic container would go down, but the other containers would be unaffected.
Similarly, some high traffic websites in a shared hosting environment may hog all of the server's resources, thus causing other websites on that server to be unreachable. This would not happen on a VPS machine as each container may only use the resources that are allocated to it.
VPS is great as it slips in nicely and bridges the gap between shared hosting and dedicated hosting services. VPS will give you the independence and flexibility of a dedicated hosting service, but at the price of a high-end shared hosting service.