Dedicate hosting are better for big websites.

Shared hosting ( Share by many user in one server)
Dedicated Hosting ( One user use the whole server)

In other words, shared hosting lesser disk space provided whereas, dedicated server will have more space and suitable for a highly traffic website.

Correctly said by louis87. Inaddition to that, with a dedicated server you'd get complete administrative access to the server with free back-up space(depending on the host). On a dedicated server you can create multiple shared accounts and resell to your customer.You have the privilege to the use the dedicated server as per your wish i.e. you can install softwares and applications of your choice. You can even get a dedicated server customized as per your hosting requirements which is not at all possible with a shared server.

Shared hosting is very cost effective, because you are sharing hosting with maybe 100 other websites on a single, powerful server.
Shared hosting offer just about all your site needs in terms of space, bandwidth, email, etc. You can even order different IP addresses for each of your websites with shared hosting.
The benefits of shared hosting is low cost (average price is around $5 month per website), your own domain name and lots of software options like database, CGI, etc. If you run a small business and don't expect more than 1000 visitors to your website per day, then shared hosting is for you.
The only problem with shared hosting is that bandwidth is limited, so if your site becomes very popular you might find yourself running out of bandwidth quickly.
If you ever wanted to test the waters and put your own website up on the Internet, start with shared hosting and your own domain - its the way to go.

Dedicated hosting is the opposite of shared hosting. Dedicated hosting is about you being in total control of the server and what goes on the server. You decide whether to host 1 site or 10 of your sites.
Dedicated hosting allows you to tailor database, email and software applications to your desire - so it works the way you want it to. This is powerful.
Dedicated hosting is ideal for websites with high traffic and large businesses who want complete control over the server so they can fine tune for special shopping cart software, etc.
Another benefit of dedicated hosting is you can resell the space/bandwidth to people who want to setup their own website.
Unlike shared hosting, dedicated hosting will cost considerably more, something like $50 month for a simple dedicated server.
If your website is critical to your business, then I'd highly recommend dedicated hosting.

Shared Is when your on a server and there are a whole bunch of other people on it too.

Share hosting is also called "website space". It devides a server running on the Internet into several "virtual" servers, and each shared web hosting have an independent domain name and complete Internet server function(supporting www、FTP、 Email and etc). Different shared web hosting on the server is independent and can be managed by user himself. However, a server hosting can only support limited shared web hosting, or user will feel the server performance is worth to worth when the amount is more than the limitation. Shared web hosting technology is a technology to save server hardware cost used in Internet servers. It's mainly used in HTTP service, and it devides some or the whole contents of a server to multiple service units which dispalys as multiple servers externally. In this way, the hardware of the server can be
made full use of.
Dedicated hosting means that the customer indenpendently rent a server for his website to visit or provide his own service. Compared to shared web hosting, the space of dedicated server is larger and the speed is quicker. Of course, it's more expensive.

In shared hosting your domain is using common space with other domains. Here you are sharing resources on the server. In dedicated hosting your domain alone use server's resource. Domain has its own web space.

Are you planning to buy hosting space for your website or looking to get into web hosting business ? If you are planning to get web hosting for a website of yours, shared hosting would be more suitable. If you are looking to get into web hosting business, a reseller plan would be ideal to start off with.

when you have high traffic or your website or application is heavy need allot
of machine resources than go for dedicated machine.

if you have low traffic with a light weight website than shared hosting is for you

Actually traffic that is not the index. I assume you need to think over the scripts. You might have low traffic but high CPU usage scripts

Dedicated hosting and Shared hosting depends on what type of customer you are and the resources that you want.

Dedicated hosting (as mentioned in previous posts) will need an extremely powerful server, which basically does what it says on the tin... it will be DEDICATED to your site and services alone.

Shared is when you share a server with many different companies hosted websites, which is great if you are just starting out.

The answer isn't really as simple as Dedicated or Shared is best...it really does does depend on a number of factors as to..

a) You're just starting out and your site is relatively small, then shared will be perfectly OK.
b) If you are a huge online business and in particular have a large number of domains running multitudes of services then dedicated will be best for you.

Just be a bit savvy when comparing hosting companies and ensure that the price reflects the service. Some of it is common sense really, for example, if somebody is offering your gargantuous amounts of bandwidth of only say £1.99 a month...STAY WELL AWAY! Chances are is that you will join them and find that yours grinds to a halt as the company is overselling their bandwidth.

Shop around, that's the best way.

i prefer dedicated hosting, only that it is more expensive
i disagreeee

I like that answer very much. Concise and to the point. But I'm interested how do you know when's the time for a web site to go on dedicated server? How many visitors, how much bandwidth?

Well, I guess for most it is when the cost of data transfer per month on a shared hosting account is higher than getting your own VPS / dedicated server or the performance of your site starts to suffer.

Getting VPS is good idea but it depends on your requirement. If you have a small site with limited traffic then shared hosting is good.