From HostThyself

Hosting (also known as web site hosting, web hosting and webhosting) is the business of housing, serving, and maintaining files for one or more Web sites. Computer space that is provided for Web site files as well and a connection to the Internet.

Typically, an individual business hosting its own site would require a hosting setup and it would be expensive. Using a hosting service lets many companies share the cost of the Internet connection for serving files.

Hosting providers offer space for a Web site that is hosted by one of their computers. Hosting companies describe such service as virtual hosting. Virtual hosting usually implies that their services will be transparent and that each Web site will have its own domain name and set of e-mail addresses. In most usages, hosting and virtual hosting are synonyms.

Some hosting companies let you have your own virtual privte server, the appearance that you are controlling a server that is dedicated entirely to your site. Dedicated hosting is the provision of a dedicated server machine that is dedicated to the traffic to your Web site. Only very busy sites require dedicated hosting.

Companies may also purchase their own servers and place them on a site that provides fast access to the Internet. This practice is called colocation.