VPS stands for Virtual Private server. A VPS is usually used as a web server,
but users can do many other things with them,
including using them for development, as game server,
for DNS purposes, and a host of other uses.
A VPS is virtual in that it appears to the user as if it
were a complete, fully functional, dedicated computer. This
isn't really the case. The virtual server is actually one
of several, which are hosted on a dedicated VPS host server. The host server
is generally a very powerful dedicated server with a
large memory. It runs programs which emulate almost
all of the features of a typical dedicated server.
These programs behave as if they were servers,
themselves, only with less memory and with less
processing power (since the memory and processing
power of the host server must be subdivided between
the virtual servers and program overhead).
There is a commonly-accepted idea of what a Virtual Private server
is; it is a program which creates what is
apparently a collection of fully-functional dedicated
servers. Unfortunately, there is no official
definition of a virtual server, and some vendors
provide some (but not all) of these features at a
lower price, insisting that their products are "true
VPSes". One quick way to determine if a vendors
offering is legit is to see whether it allows users to
install any programs they like and allow them to run
as the root (most privileged) user. The ability to do
these things are the main reason that many customers
need a VPS in the first place.