I am constantly designing, coding and managing small to midsized business sites for eCommerce, intranets and client portals... hosting is usally a question clients have and there are a few different options you have. Im going to run through the different levels and explain some of the reasons you want to buy some extra power...
First, and cheapest is a Shared Host, because of ability to virtualize servers many sites can all be hosted on a single IP looking at the host header to know which site should respond. They are good for small sites with low volume and use shared RAM, Disk Space, and CPU with all the other sites who are provisioned to that host.
Next, you have your "mid" VPS this is the option I usually choose when I need to have many sites running, moderate traffic levels or custom server requirements. The server is carved out of the clouds resources and provisioned only to your sites and has burstable memory to help counteract the Slashdot effect if you suddenly have a stroke of viral genius. This allows you to grow your site(s) while not spending more on a dedicated server which is
Our last level is a completely dedicated server... companies usually dont utilize these to their full potential and can be a waste of money if your volume isnt high enough to warrant its power
but some people like knowing its their machine and only their machine
I usually like to fall in the Virtual Private Servers section of these and im able to host many internal sites (as well as the public ones) and get the server level customization im used to with a dedicated box... god visualization is awesome :)