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It's a virtual private server. So basically you get a linux installation in a data centre somewhere, you have root access and can pretty much do whatever you like (if you don't break their acceptable usage policy)!
I just learned a new acronym. Thanks. I would recommend to look for the colocation provider nearest you. Or if you don't care then there are a bunch of them that will colocate the server for you remotely - it is costly. The new trend now are virtual hypervisors like Xen - this is actually the hottest trend in the IT industry right now. I would recommend to start looking for a provider that offers Xen virtual host. It will feel like exactly like you are running a stand alone computer but it is actually a virtual emulator which is much cheaper.
Thanks vpsland.com run Xen so I'm going to give them a try for a month and run some tests to see what the performance is like. I'm not sure how well a server with 96mb of ram will perform, hopefully well enough to run an imap server and small site with apache!