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All web hosting is not the same

Knowing what you want to do with your website is the key factor for deciding what kind of hosting you will need. Learn about the different hosting types.
Ask questions. Call the hosting company and ask about their layout and what they support.
Some applications require databases, a particular version of php, or ASP support. These are important details to know about your site.
If you are going to be accepting credit card payments or handling secure data- make sure they offer dedicated SSL support.
If you want a shopping cart and store, you probably need a database.
If you are a design or photography company you may expect to get emails with large attachments or have a system where people can upload images. Size of email attachments may be capped with some hosting companies and many specify in the terms of service that you can not have an upload system on your site as this is a potential security issue.
If you plan to send out newsletters or emails to large numbers of people, check if the web hosting company caps the number of emails you can send out at once or over a specified period or time. Many do this to prevent IP blacklisting.
If you aren't sure what you will need for the web site to run, many techs at web hosting companies should be able to let you know if what you are planning to do with your site will work on their systems.

Don't get oversold OR undersold. If you have gone through the different types of hosting and figured out what you need, stick with it. You can upgrade down the line if you need more. If you are not technically inclined to handle all of your own trouble shooting and set up issues and you do not have a technical support person, then stay away from anything that is self managed such as a VPS Virtual Private Server or a Dedicated Server. If your site traffic is enough to where you are hitting the maximums for bandwidth or database load that your web hosting company has set up, you really do need a VPS or higher end system.
Shared hosting is the most common type for small to midrange size sites. It may be cheaper, but you also share the server's resources with about 700 other people so from time to time, you may experience slow loading, blacklisted IPs, and several restrictions on what can be done on the account.
VPS Virtual Private Server hosting, you share some resources with roughly 100 other people, and you are responsible for almost all technical support. There are many benefits such as faster loading times and relabilty is better. You get your own IP address and there are fewer restrictions on what you can do or access.
Dedicated Server hosting it's all you. You are alone on the server, not sharing resources, you are responsible for ALL technical support.
Game servers are set up for the high end bandwidth and transfer rate needed for gaming.
FTP, File Sharing, Back up servers are set up for large amounts of bandwidth needed for upload and download.
Email hosting or exchange service covers you if all you need is an email system.
Application hosting, is usually free hosting, that covers specifically 1 or 2 applications. For example: images, videos, blogs, wiki systems.