Virtual Dedicated Hosting, as the name implies is essentially a cheaper (and virtual) alternative to dedicated hosting. Virtual dedicated hosting sits somewhere in between shared and dedicated hosting in terms of cost and performance. In Virtual dedicated hosting a single server is still shared across multiple accounts, however it differs from shared hosting in the sense that the provider provides a resource guarantee on CPU and RAM utilizations by using special software called virtualization softwares.
Virtualization software essentially partition a single server into multiple virtual servers . Each virtual server can be used as a standalone server and is completely isolated from the other virtual servers. Each virtual server can host its own and different operation system than the other virtual servers and from a software perspective looks as almost an independent server, but often with lower amount of resources. A more frequently used virtualization software is called Xen and is used in most of the virtual dedicated hosting providers.
The reason virtual dedicated hosting providers are most interesting is because they provide all the controls and access that is there in a dedicated hosting provider while at the same time at a cost more comparable to some shared hosting providers. This is a boon to most small organizations who do not want (or need) expensive dedicated hosting but would do well the flexibility in terms of installing software offered in dedicated hosting providers.
This is more expensive than most shared hosting providers but cheaper than dedicated hosting. Cost depends on the amount of resources (CPU/RAM) required per virtual dedicated server instance and varies from $15/month to about $70/month.
Best Suited For:
Small startups which do not need a full dedicated server but need complete control. Also the biggest advantage of virtual dedicated is that one can add more resources (CPU/RAM) on demand as and when the need arises and pay accordingly.
Some Virtual Dedicated Hosting Providers: