Virtual hosting is a method for hosting multiple domain names on a computer using a single IP address. This allows one machine to share its resources, such as memory and processor cycles, to use its resources more efficiently.
Virtual hosting lets a single server accommodate multiple Websites, with each each site getting its own "slice" of server space. By partitioning a server into several smaller "virtual" servers, a hosting company can make the most of its server resources and minimize costs for each individual customer on the server.
Virtual hosting, though, doesn't mean that customers on the same server can access each other's Websites. Customers can manage only their own section of the server, usually by using a Web-based control panel. Control over the server itself remains with the hosting provider.
Because it uses only part of a server's resources, virtual hosting is cheaper than dedicated hosting. The Web-based control panel typically makes virtual hosting easier as well.