Virtual Private Servers are machines partitioned to allow multiple concurrent instances- though not typically as much as shared hosting. This means that you can have a number of users on the same server, all with their own resources and software. The only limits to a Virtual Private Server are the hardware, the additional load, and security limitations established by the administrators.
Dedicated Servers are more user-involved. They are physical machines in data centers managed by a staff of admins to maintain your server integrity against hardware failure, loss of data, as well as general upkeep. It’s the workhorse of web hosting. More user-intensive than Virtual Private Servers, Dedicated Servers allow you the freedom of having complete control of your website's hosting environment; users should be aware that there is a learning curve.
And then there are Colocation Centers- It's the simplest of the three. You buy a server, manage all of the software and hardware, so it's similar to having a Dedicated Server. You're in charge of everything; but you rent space inside someone else’s data center, and the data center supplies all the power, security, and bandwidth for your server.
Not sure which is a good fit for you?
If you have spent some time with a website, and you have it pretty much handled, but need more elbow space, as well as specific features not offered with a shared hosting account, but still want someone else to do the heavy lifting (you're busy running a business and fighting intergalactic criminals, we understand), then a Virtual Private Server would be something for you to consider.
Are you looking for more horsepower than a Virtual Private Server, but don't want to have to go out and buy your own server? Dedicated Servers may be in your future. You manage everything, but don't have to worry about physically doing anything.
However, if you want more of a hands-on approach, then you should consider Colocation. It's similar to having a Dedicated server, but instead of only using what we select, you literally hand-pick every component yourself, along with your server's software and settings. In some cases, you can even select your own ISP (our speeds are blazing fast, by the way) if you want.
Virtual Private Servers, Dedicated Servers, and Colocation Centers, for all their differences, have one thing in common: logistics. They employ the same basic principles in regards to, security, cooling, and power. For those not in the know, you can't just lock a few hundred servers in a closet and walk away. You have to restrict access to the location to prevent unauthorized personnel from presenting a threat to the servers, monitor their temperature so their hardware doesn't fail (they can push out a LOT of heat), and ensuring that there are reliable power sources as well as redundant power in the event of a local power grid failure.
If you're considering upgrading from shared hosting, or if you want more options and control of your website, then you should start considering Virtual Private Servers, Dedicated Servers, and Colocation Centers.