What is Virtual Private Server (VPS)

Virtual Private Server (VPS) or Virtual Dedicated Server is a bridge between the shared hosting and dedicated hosting. That means the users can get the same (almost) benefits of having a dedicated server system for their website without bearing the high cost of dedicated hosting.

In dedicated hosting you get a complete server system dedicated for your websites giving you very high level of control and processing power. In last few years many sophisticated virtualization software came into the market. That enabled the hosting providers to partition a single system into multiple virtual system each having its own operating system, disk space and memory. With a VPS users get a single partition or virtual system of a high power machine, so users can install /uninstall any software in their partition, reboot their partition at will.

Pros:

• One big advantage over the shared web hosting is that you don't have to share IP addresses with other unknown sites. In shared hosting you share the same operating system as well as its IP address with a lot of other websites. God knows which types of websites those are. If one of them is bad enough to get penalized, then search engines can punish all the websites running on that IP address. With VPS you will not run that risk. 
• As I said earlier, the user has the ability to install / uninstall any software in its own virtual server and reboot it at any time. Let us say you want to build your website with a special database server you are comfortable with. If shared hosting provide do not support that database then your hands are tied, but in VPS you can easily install that database in your private server.
• Price is not too high compared to the shared web hosting. If you pay 10 bucks per month for shared hosting, chances are you can pay 15 extra bucks for a virtual server to get significantly more benefits.

Cons:

• User has to manage the virtual server, so to deal with it you need to have more technical skills or have to hire somebody 

Recommended To:

• A small / mid size business
• Web sites with high multimedia content e.g. videos, games
• If a website has a chance to receive occasional super-high traffic then you need a VPS or dedicated server to support that, otherwise a lot of customers will be left unhappy

It is very important to choose a VPS provider with a very good customer service. A few recommendations --

• Host Gator -- unparalleled customer service. As of now they allow you to choose from 9 different levels of VPS. So far I didn't  see that much flexibility anywhere else. (Use coupon code INIT082010 to get $9.94 off the first month's package price)
• InMotion
• Liquid Web