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A virtual dedicated server is where the physical server space is divided virtually into several parts. It is possible to get all the uses of a dedicated server using a virtual dedicated server. There are two main benefits of this option:
The first benefit of a virtual dedicated server is that they allow root-level access to individual clients without needing any physically dedicated servers. If your needs can not be taken care of by shared hosting, and you need a dedicated IP address, then a virtual dedicated server is the best solution.
The second benefit of a virtual dedicated server is that this hosting solution is cheaper than fully dedicated servers and also provides similar services as said dedicated servers.
The only real catch when it comes to using a virtual dedicated server is that you will have fairly limited options and will not be able to tweak the operating system or server itself.