I have a VPS, on which I host a few small sites for myself and a few friends. I like it because it gives me the freedom to choose everything from the operating system and software to who has access to what, without having to pay for a whole great server or be limited by the available software on a hosting plan.
I could get by with much less space and power than I have available to me, but it's nice to know that it's there in case I have a traffic spike for any reason. It's also good for storing files on temporarily or testing out random stuff.
I get mine from here:
ServerForce Ltd