When trying to understand the differences between shared, dedicated and VPS (Virtual Private Servers) it is helpful to picture how you’d like to house your website files.
Shared hosting is like an apartment building where the building or server has many tenants or hosting accounts sharing the space and the utilities. This works just fine if you have a small family, but if everyone in the building has ten roommates move in for example, all who are constantly running the water and using the wifi then the water pressure and wifi speed will start to suffer. The key to shared hosting is that it is meant for small business websites, sure you can pack the roommates or files in like sardines, but it will start to get really uncomfortable.
The next level up is VPS or Virtual Private Servers. You can think of VPS as townhouses, you are still sharing some resources with neighbors, but less so than an apartment building and there is quite a bit more space. For those that want their own space, there are dedicated servers, the equivalent of living in your own house. You have a lot more room, no neighbors and you can divide up the rooms in the building however you want.
What does this all mean for you? As with housing the larger and more private the property the more it costs associated, but not only that, the more private the property the more of it you need to maintain yourself. Shared hosting like apartments is the least expensive with most of the server being managed by someone else, the only thing you need to worry about is your account. As you go up the tiers to VPS and Dedicated all of a sudden things start to get more expensive and you have to mow your own lawn and service your own air conditioning.
Why should you upgrade to a VPS or Dedicated Server? This may have to do with the type of site you have. If you have a lot of photos and videos that are password protected, this may be against your host’s rules for shared accounts which often prohibit file storage. Or you have a lot of site visitors, the metaphorical guests in your apartment, and your account may start getting crowded as those guests start clogging up the “hallways” otherwise known as CPU capacity. Another reason is to have full control over the configuration of your server, if you own a house you can make modifications you may not be allowed to make in an apartment or townhome.