Dedicated server hosting is one of the most expensive and sophisticated forms of server hosting, but it is a good choice for many online businesses. However, before you take out a contract for dedicated server hosting, stop for a moment and think about whether you really need it, or whether an alternative such as shared hosting or a VPS would be better for you.
If you run a personal website or blog, then shared hosting may be your best bet. Shared hosting is ideal for people who do not get a huge amount of traffic to their websites. In fact, shared hosting can cope with traffic levels that number thousands of visitors per day. If you start getting warnings that your website is too busy for your hosting, and consuming too much memory or bandwidth, then you may want to upgrade.
A virtual private server, or VPS is somewhere in between shared hosting and dedicated server hosting. With a VPS you have full control over a virtual server, but that virtual server is running on hardware that is shared by several other customers. You can configure the server however you like, but you get only a fraction of the resources that the physical hardware has to offer.
With a dedicated server, you are the only customer that is using the hardware, and have full control over the software and services that are run on that hardware. You can expect much higher performance and much better stability than you would get with a virtual private server or with private hosting. Some dedicated servers are maintained by the hosting company. These are called managed servers. Others require you to take care of security updates and configuration. These are less expensive hosting packages, and are suitable for people who are confident in their systems administration skills.