Shared Hosting:
As the name implies your hosted site or content will share a single servers resources with many other sites.  While this is a great way to get your site up and running with little investment, it is necessary to consider the needs of your site and its visitors as your site grows.  The bandwidth and processor limitations that come with sharing a server may begin to show as your site traffic increases or if you add things ike streaming media content.

Dedicated Hosting:
In dedicated web hosting , a customers data is accessed from a server that is rented or leased from their service provider. Rather than sharing space on a single server and sharing bandwidth with many other customers, dedicated hosting gives content providers the opportunity to host their data with guaranteed performance.  Dedicated hosting in a single or multiple server environment gives you the freedom to add new applications at will and the headroom to grow your site traffic.  Dedicated hosting makes the most sense for small to medium businesses who don't have a staff to manage their site and servers.  A good dedicated hosting provider will have the ability to manage your site and servers as well as other parts of your online presence such as e-mail, vpns and more.    Dedicated providers usually also offer a secure facility, power backup and access to multiple backbone connections.

Colocation:
Colocating equipment with a hosting provider gives you the most freedom and choices.    You choose your own server, setup all of the software yourself and then place it in the HSPs facility.  Colocation makes the most sense for companies that have the personnel to manage their own servers.  As with dedicated hosting you will typically get the benefits of a secure facility, power backup and access to multiple backbone connections.