A VPS runs its own copy of an operating system, and customers have superuser-level access to that operating system instance, so they can install almost any software that runs on that OS.

For many purposes they are functionally equivalent to a dedicated physical server, and being software-defined, are able to be much more easily created and configured.

They are priced much lower than an equivalent physical server, but as they share the underlying physical hardware with other VPSs, performance may be lower, and may depend on the workload of other instances on the same hardware node.

Virtualization

The force driving server virtualization is similar to that which led to the development of time-sharing and multiprogramming in the past.

Although the resources are still shared, as under the time-sharing model, virtualization provides a higher level of security, dependent on the type of virtualization used, as the individual virtual servers are mostly isolated from each other and may run their own  operating system which can be independently rebooted as a virtual instance.

Hosting

Many companies offer virtual private server hosting or virtual dedicated server hosting as an extension for web hosting services. There are several challenges to consider when licensing proprietary software in multi-tenant virtual environments.

Cloud servers

A VPS which is dynamic (that is, it can be changed at runtime) is often referred to as a cloud server.