You could think of the sites that share your server as your roommates; there's really not that much separating you from them. Sure, you can close the bedroom door, but they can still cause nightmares for you in the kitchen and the bathroom. In web hosting terms, all the sites share a single server's resources, so huge traffic spike on Site A may impact the neighboring sites' performances. It's even possible that another site could take down the shared server altogether, if it crashed hard enough.
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A VPS also allows for more customization and control of data transfer and storage, and thus many business owners will opt to switch to a VPS as their sites grow. Several virtual private servers can be installed on a single physical server, and customers can take as much space as they need. Many hosts even offer daily billing in which you only pay for the resources you consume. VPS hosting essentially acts in a similar way as a dedicated server without actually being one.
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