A dedicated server is a server that usually offers total control. You can install any software, reboot the system, shutdown, and install and manage plugins. As with all hosting options, you have two basic flavors on dedicated servers, Windows™ and Linux. You also have two options for your server, and that is managed and unmanaged. The managed server is where the hosting company who owns the server will updated and offer some level of support if issues arise. The unmanaged server is where you are responsible for keeping the software and plugins updated, and the hosting company who owns the server will offer little or no support. The most popular option because of the former is managed hosting. The positive part about using the dedicated server is that you have total control regarding the environment, and you are not operating in a shared environment where another webmaster also has hosted on your server. The downside to dedicated servers is the cost compared to a VPS or shared hosting plan.

For more information, see: http://en.wikipedia.org/wiki/Dedicated_hosting_service

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