Several years ago buying hosting was simple, but fairly costly. Each website had to be hosted on a different account so if you had ten sites you would have needed 10 separate accounts. Then along came reseller hosting which allowed you to become your own web host and you could put 50 or so sites under one master account but each website had its own control panel. After that came Virtual Private Server hosting which is a cross between a dedicated server and reseller hosting and offered you unlimited hosting accounts. The final revolution came with add-on domains for shared hosting.
Nowadays you have three options regardless of the number of domains you want to host. Virtually every web hosting company offers add-on domains to your shared hosting account. This means that you could in theory have 100 or more websites on one account for which you pay just $5 a month.
If this was the case then why would you need Reseller or VPS hosting?
If you are planning to run a few basic websites, maybe a personal blog or a small company website, chances are that shared hosting is going to be perfect for you. You can effectively use a single shared hosting account to create dozens of low traffic websites for AdSense purposes with no trouble at all.
However, if you are planning to run some high traffic or high bandwidth sites, you may start off with shared hosting but find that you are quickly being pushed by your web host to upgrade to VPS hosting because of the amount of computing resources your site is using. Examples include popular forums, high traffic e-commerce sites, torrent sites (which are probably banned anyway) and popular media sites.
As online video becomes more popular you may find that your host quickly shuts down your shared hosting account if you are hosting some large video files. Sometimes hosts will go one step further and disable video playback altogether. In these situations you need to get VPS hosting because you can set up the system to your exact requirements, use more computing resources and handle higher traffic websites.
There is no real reason to opt for Reseller hosting unless you plan to sell shared hosting accounts to other people, for example your clients. Some people who make a living from flipping websites use Reseller hosting because they like to include several months of free hosting and then start charging the buyer a monthly fee, thereby increasing the lifetime value of the buyer.
Only in extreme cases should you consider a dedicated server, in which case your site should already be making a lot of money each month. A decent dedicated server can cost $150 or more a month, while a VPS hosting account on a more powerful server might only cost $30 but with many of the same benefits as a dedicated server, so think carefully before choosing a dedicated server.