What is VPS Hosting?
VPS = Virtual Private Server
This type of hosting is basically a partition of a dedicated server and will work in the same way. It has its own CPU and RAM resources etc. VPS is about half way between reseller and dedicated servers. It has reseller features and dedicated backbone at a price to suit.
Most hosts will allow you to have root access with VPS so you can install what you wish on it.
VPS gives advantages such as:
More Resources for your site(s)
Gives an idea of what a managed server is like
Gives you more freedom and Reseller or shared
This is a step that a webmaster should take if they are stretching reseller limits but cannot afford to buy a dedicated server.