The term virtual server refers to a number of distinct technologies. Here we examine the type of virtual server known as the Virtual Private Server (VPS), otherwise called a Virtual Dedicated Server (VDS). This type of virtual server is a method of dividing a single server machine into multiple servers by employing virtual machines. Each virtual server has its own operating system and server administrators can reboot and operate on them independently.

Data centers have financial and physical limitations. VPSs overcome some of these limitations by reducing the physical footprint and achieving cost effectiveness through consolidation. Shared server solutions are an alternative to a VPS that also help to overcome these limitations. The advantages and disadvantages of a VPS contrasted against a shared server solution.

The core advantages of a VPS are cost, independence, insulation, performance and security. A VPS essentially provides all of the benefits of operating one server per machine and insulation, in a virtual way, provides the same boundaries that exist between servers in separate machines. This limits the disadvantages that the system introduces. It also allows performance to be higher because there are no bottlenecks introduced from the coordination of resources. In addition, there is no threat of a compromised server influencing any of the other servers on its machine.

One of the core disadvantages of a VPS is the ability to adapt to load. During periods of high traffic, a server in a shared environment can borrow the resources of its fellow servers in order to handle the additional load. In general, VPSs and one server per machine environments are more wasteful than shared solutions. Resources often go unused and the data center must account for far greater resources than they would use in a shared scenario due to individual peak levels.

The term is used for emphasizing that the virtual machine, although running in software on the same physical computer as other customers' virtual machines, is in many respects 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 server software.

Virtual dedicated server (VDS) is also used as synonyms of VPS. However, the latter also occasionally indicates that the server does not use burst/shared RAM through multiple machines and may use individual CPU cores. The term cloud server is also used to describe the same concept, normally where such systems can be setup and re-configured on the fly.

Virtual dedicated servers offer many of the capabilities and features of dedicated servers, including admin (root) access and dedicated IP addresses, but at a much lower price. However, as a virtual dedicated server is, indeed, virtually dedicated, the customer in fact shares the server space with a small number of other customers. But because each virtual dedicated server is effectively isolated from other accounts on the server, the user has full control over the server space. As well, virtual dedicated server plans feature very high performance and available disk space and bandwidth.

Virtual dedicated servers are particularly useful for companies and individuals that run higher-traffic Web sites or complex applications and thus need the bandwidth, consistent performance, and flexibility of a virtual dedicated server.

Virtual Dedicated Server (VDS) Technology is a new technology based on the concept of partitions on mainframes and advanced resource scheduling to divide a computer into many virtually isolated servers. A VDS simply put is, a server that runs inside another server. Each VDS acts like a dedicated server but shares the same hardware.

VDS technology completely isolates each VDS, creating a more secure and reliable hosting environment. Each VDS has its own isolated disk space, guaranteed network interface bandwidth, guaranteed CPU allocation, RAM and operating system. If a VDS on the same physical server crashes, the other accounts on the server are protected and remain unaffected. It is not possible for any account to use up the entire RAM, disk space, network bandwidth, CPU cycles, or any other resources of the Hosting Server. Neither is it possible for one account to view/edit the files of any other account.

The VDS allows small Internet providers to set up their individual hosting application while avoiding them extra costs relating to the hosting platform and a need to worry about the server operation.