Also known as virtual hosting or shared hosting, virtual web hosting should be what 99% of people need.
Most people have websites that are not very demanding. In such a case, it would be wasteful to rent an entire server (also known as dedicated hosting). It would make more sense that you share a server with others (who also have low requirements).
There are downsides - while everything may be cheaper, the amount of power available to you is limited. In bad situations, another person on the same server as you may use up too many resources, resulting in your own site becoming inaccessible.