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VPS commonly known as Virtual Private Server is also known as VDS - Virtual Dedicated Server is where a physical server is partitioned into several servers in a way that each partitioned server appears and functions as a dedicated server. This type of server is similar, but different than a virtual private network, which is typically a privatized intranet or proxied server.

To explain the concept of a VPS in detail - basically they are isolated server environments located on a single partitioned physical server. In any case a VPS executes and functions just like a stand-alone server for its users and loaded applications:
a) Each individual VPS provides full administrative access along with its own processes, users, directories and files.
b) Each VPS normally has its own system configuration files and added applications
c) Most important of all - each individual VPS can have its own IP addresses, port numbers along with routing rules.

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Benefits of shared hosting and dedicated hosting is what makes a Virtual Private Server (VPS). VPS uses the technique of creating a virtual server that runs inside a hardware server through a specially created partition.

Benefits Of VPS
a) Cost Effective
b) Works almost like a dedicated server.

If you are planning to use a VPS then be assured to enjoy the features and functionality of a dedicated server. Those site administrators who have to manage multiple domains, or those who have fixed web based applications and are good at managing a server on their own will always prefer a VPS. Apart from that a VPS provides a feature whereby you can manage your dedicated environment directly through SSH or Remote Desktop Connection. Also there is a provision by which you can add a control panel like Plesk to your Linux Base VPS, Linux Premium VPS and Linux Premium VPS + plans. The control panel enables you as an administrator to perform actions to yourr VPS instantly, without contactacting the support team.

How is a VPS different than shared hosting?
VPS provides resources and flexibility of a dedicated server by providing your own bundle of services and customizable disk space, because of which the restrictions of a shared hosting service is eliminated. On the other side Shared hosting has many limitations as its users do not have administrative rights and access. Also software configurations cannot be customized, eventhough physical resources are multiplexed. Using a VPS, you can control your own unique file system and CGI-BIN, disk space, system resources, bandwidth and memory space allotments.

Different web hosting companies have different names for a VPS, along with VPS some call it as Virtual Dedicated Server while others call it is as Dynamic Dedicated Server. These days there are multiple companies offering Virtual Private Server.

So how does it work?
Step 1 : A Physical server boots up normally.
Step 2 : After booting it runs a program that boots each virtual server within a virtualization environment (similar to an emulator). In a normal case the virtual servers have no direct access to hardware and are usually booted from a disk image.
Step 3 : Virtualizations: 2 types viz - software based and hardware based. In a software based virtualization environment, the virtual machines share the same kernel and actually require the main node's resources. This type of virtualization has many benefits, because of quota incrementing and decrementing in real time with no need to restart the node. The main examples are Xen, Virtuozzo, Vserver, and OpenVZ (which is the open source and development version of Parallels Virtuozzo Containers).