Hello Forcefed,
The differences between the various levels of hosting (Shared/Virtual, Virtual Private Server (VPS), and Dedicated) basically all comes down to the expense vs the resources. At the low end you have shared accounts where you only receive limited amounts of resources but for a small price. At the other end of the spectrum where your costs are increased but 100% of the server's resources are yours.
Shared accounts are great in that they are managed by the host but the limited resources can really be a potential problem. If you expect to grow beyond the shared environment try and choose a host that can migrate you seamlessly to a larger account when the time comes. If you are doing adult then be sure and choose a host that allows adult content and is familiar with the utilization of resources that adult sites can demand, there is nothing worse than having your account turned off and terminated by a host not prepared for this. Finally with a shared you also run the risk that one of the other accounts on the server will do something or runs a script that shuts you and the whole server down.
VPS accounts are a step up from shared and you get dedicated resources assigned to your account. For example with the account you might receive 128 mb of RAM and 5 GB of HDD space. Your space is partitioned separately from other customers on the server so that even if there sites go down yours can remain in operation.
Finally with Dedicated Hosting all of the servers resources are yours and you don't have to worry about another client taking down your server. Obviously since the resource allocation is yours you can optimize the server to perform its best for your applications.
Each level of hosting has its purpose and most companies due to budget constraints will start out using Shared hosting and then graduating to larger resources as the business grows.
Forcefed I hope that this has helped. To get my plug in
http://www.caro.net has all three choices of hosting available and given the chance I would certainly like to earn your business. We currently have some great specials available including your first month FREE on our shared accounts and 48 hour FREE test drives of our dedicated servers and the network.
Good luck with your business and if you have any other hosting questions I will always be glad to help.