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A VPS can be used for an unlimited number of tasks. You could setup a small game server or run a private ftp store, you can run multiple email accounts and websites. Or you can use it as a development computer, many people have thier own server for everything from hobbies to businesses. VPS's are cost effective costing only a fraction as much as a dedicated server.

From a technical stand point a VPS is a server running virtually on another physical server. This sounds like it may have a huge performance impact, however because of modern technology we are able to give direct hardware level access to the VPS much like a fully dedicated server. The only shared resource is the hard drive which is offset but running an efficent and reliable RAID array. VPS technology includes disk access protocols that keeps your data separated and secure from other users also hosting VPS's on the same physical server.