A VPS uses virtualization to provide isolated resources on shared physical hardware, while a dedicated server gives one customer exclusive access to the physical machine. Both can offer root access and custom software, but dedicated servers provide the highest level of hardware isolation.
What to consider
VPS hosting is usually the better starting point for applications that need more control than shared hosting but do not require an entire server. Dedicated infrastructure becomes more compelling for sustained high resource use, large databases, custom storage layouts or strict performance requirements.
Cost should include management, backups, monitoring and operational time—not only the server rental. Many workloads can scale efficiently on VPS infrastructure before dedicated hardware becomes necessary.