With VPS, you pay for what you use in the sense that you select a certain amount of bandwidth and storage to be allocated in advance. Scaling involves resizing your resources. But with cloud hosting, you pay for what you use in that your resource levels are not pre-determined, which means unpredictable pricing that tends to be more costly than VPS due to the overhead and complexity involved.
VPS hosting is like you are living in an apartment complex. It means that other people are living in the same building, but you have your own secure apartment. You will get more room and restrictions will be fewer as compared to living in a dorm. It also means that if your neighbour is misbehaving, it is the problem of owner of building, not yours.
A VPS doesn’t just have more RAM, disk space, and a proprietary share of CPU than a shared account. Depending on the provider, some VPS plans offer burstable memory, which is a pool of RAM set aside for extraordinary events. This is the stuff that can help counter the so-called “Digg-effect,” that much-whispered about occurrence that’s the simultaneous hope and fear of everyone who runs a web site. When you have an unexpected high traffic event, burstable memory will call on a pool of reserved, shared memory to satisfy the needs of temporary high traffic. This is not available on shared servers and, while the necessary memory is available on a dedicated server, your site might not get the kind of traffic on a daily basis to justify the expense of a dedicated server. Again, not all VPS plans have burstable memory, so ask your provider if their VPS plans do.