Virtual private server (VPS) is a term used to refer to a virtual machine. The term is used for emphasizing that the virtual machine, although running in software on the same physical computer as other customers virtual machines.
A VPS is functionally equivalent to a separate physical computer, is dedicated to the individual customer's needs, has the privacy of a separate physical computer, and can be configured to run as a server computer (i.e. to run server software).
The term virtual dedicated server or VDS is used less often for the same concept, however it may indicate that the server does not use burst/shared ram through multiple machines, as well as individual CPU cores.
In addition to reducing hardware and power expenses, virtualisation allows businesses to run their legacy applications on older versions of an operating system on the same server as newer applications.
Virtual private servers bridge the gap between shared web hosting services and dedicated hosting services, giving independence from other customers of the VPS service in software terms but at less cost than a physical dedicated server.
As a VPS runs its own copy of its operating system, customers have superuser-level access to that operating system instance, and can install almost any software that runs on the OS. Certain software does not run well in a virtualized environment, such as virtualizers themselves; some VPS providers place further restrictions, but they are generally lax compared to those in shared hosting environments.
Due to the number of virtualization clients typically running on a single machine, a VPS generally has limited processor time, RAM, and disk space.
This type of service is generally offered with no limit on the amount of data-transferred on a fixed bandwidth line. Usually, unmetered hosting is offered with 10 Mbit/s, 100 Mbit/s or 1000 Mbit/s (with some as high as 10Gbit/s). This means that the customer is theoretically able to use 3.33~ TB on 10 Mbit/s, 33~ TB on 100 Mbit/s and 333~ TB on a 1000 Mbit/s line per month (although in practice the values will be significantly less).