With so many options to choose from, how do you even know what kind of hosting you should get?

Here are the basic options:

Shared

Your website will be on a computer with many other account holders. This enables inexpensive pricing.

Who should use it?

Good for users with low bandwidth requirements, such as text-only or mostly text-only, and low to medium numbers of daily visitors. Good starting point for small to medium websites. Obviously, security is not as top notch when you are sharing the same computer as others. But the biggest problem is with space and bandwidth. While many hosts offer alleged "unlimited" hosting (what is unlimited hosting?), they all will cut you off if your site gets too big; you will then have to move or upgrade to VPS.

Virtual Private Server (VPS)

You website will be located on it's own partition on a computer, along with a few other accounts. This is the next best thing to a dedicated server; you will be on your own partition, entirely seperate from other websites, but still sharing the same physical computer.

Who should use it?

This is ideal for the typical heavy user. If you will have a large forum, lots of images or audio or video, lots of users, etc, you will most likely want to go with a VPS hosting account.

Dedicated

You will have your website hosted on it's OWN server; just you, and nobody else. You are essentially leasing your own server from the hosting company.

Who should use it?

This is for only the heaviest of users. Large video or gaming sites, extremely heavy-use forums, etc.

Co-location

Similar to a dedicated server, this is when you purchase your own computer but have it physically located at the web hosting company. You would typically use your own IT administrator to administer the computer, unless you have managed hosting.

Managed

You have a dedicated or VPS hosting account, and you would also pay the host to upgrade and administer the server, acting as your IT administrator in addition to your host.