It’s a trick question, because the answer is that there is no difference. A VPS (Virtual Private Server) and a VDS (Virtual Dedicated Server) are the same thing. The purpose of this page is to say exactly what that thing is.
A company’s IT presence, which may include the website and everything else to do with the company (accounting systems, stock control – that sort of thing) runs on a computer which is known as a “server”. As far as a website is concerned, the server may be owned by the company itself, or by a hosting service – that is, a company set up to provide space and other services on computers that it owns on which websites belonging to other companies can be based or “hosted”.
The most obvious advantage to the user is that hardware is a large part of the cost of any IT system and renting space on someone else’s hardware means that the cost is split across a number of users. Other benefits stem from the fact that maintenance (including updates) may be done by the staff of the company providing the hardware.
However many virtual private servers there may be on a single hardware complex (which will include mainframe or other central computing devices, storage, communications devices and other equipment), each will have its own operating system. The customer has access as a superuser to that instance of that operating system, though not to operating system instances belonging to other renters of space on the same equipment, and can install any software capable of running under that operating system.
The drawback may be that performance is reduced because of the number of users at any time.