The term virtual host or vhost refers to the practice of running multiple websites on a single physical server. It can be IP-based meaning that the different websites have the same IP address or name-based meaning that you have multiple names running on one IP address. The fact that multiple sites are running on the same physical server are not apparent to the end users.
Such types of hosting services are used by organizations that do not want to purchase or maintain their own server or internet connections to host their own websites. A virtual host will provide its clients with domain name registration, email services and also web site design and creation services if the customer so requires.
A major limitation of this type of hosting services is that there are multiple websites that run on a single physical server. This results in a competition among the users for limited resources like bandwidth, storage space, memory, etc thereby affecting website performance.
When a customer wants to have its own dedicated server, some service providers rent out their dedicated server which is housed at the data center of the service provider. If the customer is allowed to place his own server at the service provider’s location, it is known as colocation.