Most self-hosted blogs are on shared hosting. In other words, many sites - sometimes hundreds - reside on the same server. Cheap hosts often oversell their boxes which leads to crappy service. A dedicated server on the other hand is one in which you have exclusive use. You rent/lease the server from your webhost and that server hosts your site only. You have also have root access. Obviously the cost for this is much higher than it is for shared hosting.
