A VPS is a Virtual Private Server for hosting websites (e-commerce, content, media, etc.) and/or software applications, particularly web based ones (portals, extranet, collaborative solutions, wiki, CRM software, etc.). Unlike shared hosting, this data is isolated on a single virtual machine, with resources solely dedicated to its user.
The VPS is a perfect compromise between web hosting plans and physical servers, combining reliability with the high performance of a dedicated environment. It provides you with more control than a web hosting plan, but without the difficulty of managing a server's physical hardware.