VPS stands for “Virtual Private Server”. The key word here is virtual.
VPS Hosting lets you have the functionality of a dedicated server without the full costs.
A physical server can host multiple VPS’s with each VPS having it’s own dedicated resources. So technically you are still sharing a physical server with other users but you have the advantage of having some of the servers resources partitioned off for your dedicated use.
A VPS has the advantage of also being more flexible and expandable for when your hosting requirements change as you can purchase a bigger allocation of resources or even reduce them without having to move your site.
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