Good question! A virtual private server (VPS) is a little bit like a cross between shared hosting and a dedicated server. It’s not quite the best of both worlds, but it is a good compromise and it can help you to keep costs down. Some people compare shared hosting to living in an apartment complex and VPS hosting to living in a condo.
With shared hosting, you’re sharing a server and that server’s resources with a bunch of other websites. With a VPS, you’re still sharing some resources because that’s determined by the hardware, but the software itself is set up in such a way that one machine acts like multiple different servers, providing a different virtual server for every user.
For webmasters, using a VPS means that they get the administrative power of a dedicated hosting setup, including the ability to customize their server to suit them.