VPS is an abbreviation of Virtual Private Server which practically means a server that looks and behaves exactly as any dedicated server while in reality, it shares the server hardware with other Virtual private servers. Usually, a VPS as referred to as VDS which in turn is an abbreviation of Virtual Dedicated Server. Also, a VPS can be referred to as VM which is an abbreviation of Virtual Machine.
VPS is considered usually as a cheaper alternative to the dedicated server due to the following reasons:
1-Hardware Consolidation: it is usually much cheaper to buy 1 huge server than buying 4 smaller servers that have in total same specs as the huge server. This is the case because all servers share hardware parts that do not add any value to the performance while adding to the total price such as power supply, case, and motherboard.
2- Resource Sharing: a single server is not utilized fully all the time (actually it is rarely fully utilized), So if we run more than one server on the same hardware other servers can use the unutilized resources of other servers to boost their performance. This, in turn, gives the VPS an opportunity to outperform a dedicated server with same specs in some cases.