A virtual private server (VPS) provides similar levels of control to a dedicated server and is a significant step up in terms of performance from a shared hosting package.
As the name implies, a VPS is in effect a virtual dedicated server including operating system, which the user has complete access to and control over. This allows the customer to configure their server to their exact specifications including software installation and reboots.
The VPS operating systems are installed on the physical server and are each allocated a portion of the server resources depending on the specification of the VPS package. Virtualization effectively isolates each ‘server’ from another and is a highly secure state in which users are unable to view or access another users files, access any more of the server resources than which they were assigned or, unknowingly or not, facilitate the spread of malware between users.
Because a VPS is configured with software the setup process is much quicker and easier compared to setting up the hardware required of a true dedicated server. This is reflected in the pricing with a typical VPS usually costing half as much as a dedicated server.
Of course, a dedicated server will typically outperform an equivalent VPS, however its important to remember that they are different products at different price points and a better comparison would be between a VPS and a shared hosting package.