VPS gives you the functions and features and of a managed dedicated server but without the price. You have full control of your VPS including full root access to install your own applications not viable on a shared hosting environment. Since a VPS is an isolated hosting environment it allows you more freedom to run scripts that aren't allowed on a shared hosting environment such as sending out a mailing list and since you get your own mail server you don't have to worry about other users blacklisting the mail server ip, it allows you to create reseller accounts if you are a reseller, and more.
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