VPS stands for Virtual Private Server. It is a term used by Internet hosting services 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, 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.
The terms virtual root server (VRS) and virtual dedicated server (VDS) are also used as synonyms of VPS it involves a way where the physical server is partitioned into multiple servers. Each of the multiple servers in effect carries the appearance & capabilities of running on its own dedicated machine. Each virtual server can be rebooted independently and can run its own full-fledged operating system.
However, VDS 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.
In a traditional shared hosting environment, one account can access other's files when not secured properly. It is a well known fact that people can read other's passwords located in php files since they are all running under the web server's privilege, and gain access to sensitive data.
A VPS account is totally isolated from other VPS accounts, because each VPS account is located in its own “Virtual Environment”. Other VPS accounts cannot access your files or data in the memory. You will have your own copy of apache, DNS servers, database server, and user accounts.
Performance guarantee : VPS utilizes virtualization technology that provides performance guarantee to your VPS account, so that no matter what other VPSs are doing, your VPS environment will continue to receive guaranteed amount of CPU, Memory and network resources.
Since VPS gives you full root access, you can set up any services or daemons as you like, such as DNS servers, email servers, web servers, java servlet, database servers and more. Imagine having a dedicated server now with at a very affordable price. 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 super user-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 virtualizes themselves; some VPS providers place further restrictions, but they are generally less 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.