Web hosts are companies that provide space on a server they own for use by their clients as well as providing Internet connectivity, typically in a data center. The host may also provide an interface or control panel for managing the Web server and installing scripts as well as other services like e-mail and database accessibility. Some hosts specialize in certain software or services (e.g. e-commerce). They are commonly used by larger companies to outsource network infrastructure to a hosting company.
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There are two types of hosting, shared and dedicated. Shared hosting means the physical machine serving your site has other sites being served from the same machine. This is ideal for sites that only use the standard resources and has the advantage of being more cost effective. Dedicated hosting only your site is on the one server. This is desireable when you need to instal non-standard programs or where performance might be an issue.
Which is right for you? If your site is an informational site or an standard ecommerce store, then shared hosting is fine. But, if you providing or selling a service such as large streaming media or serving large files, then you probably should go with a dedicated hosting package.
Much like shared hosting websites can have a dynamic (shared) or static (dedicated) ip. If you intend to do ecommerce, then you will have to a static ip address (due to SSL restrictions), this usually is a little more expensive from your hosting company.