Definition
A VPS (virtual private server) is a virtual machine that runs on shared physical hardware but is allocated dedicated CPU cores, RAM and storage, so it behaves like its own server even though it is one of several guests on the same box. It sits between shared hosting, where you share resources with many other tenants and have limited control, and dedicated hosting, where you rent a whole physical machine outright. A hypervisor such as KVM, VMware or Xen partitions the host into isolated virtual machines, each running its own kernel, so one tenant's load or crash does not spill into another's. VPS plans typically start around USD 4 to 6 a month for 1 vCPU and 1-2 GB RAM, and include root access, your choice of operating system, and the ability to install anything from a web server to a database to a custom application, all for far less than a dedicated server costs. Common providers include Hetzner, DigitalOcean, Linode, Vultr, OVHcloud and Kamatera.
How it works
Behind a VPS, a hypervisor (KVM, VMware, Xen) carves up one physical server into many isolated virtual machines, each with its own kernel and dedicated resources. The hosting provider manages the physical hardware; you manage the operating system and everything above it.
Why it matters
A VPS is the right next step when shared hosting starts to feel restrictive: when you need more reliable performance, custom software, more memory, or full control of the server. For most sites that have outgrown shared but do not need a whole physical machine, a VPS hits the sweet spot of price, control and performance.