What is co-location?

Co-Location is usually a service where you provide a server (and sometimes associated hardware such as a network switch or firewall) and the hosting company installs your kit into their racks.  This is sometimes a better option as you maintain ownership of the kit and just pay for the rack space and bandwidth that you use, however its normally your responsibility to ensure you have the corect licensing for operating systems and appropriate backup solutions.

How much does it cost?

It depends on how much rack space and bandwidth you need, which company you choose for your co-location and any other services you might also need.  Typically when compared to a dedicated or virtual server the setup cost is usually high, but the ongoing monthly fees are usually lower.  You might also pay additional fees for the hosting company to provide on site support dependant on your circumstance (e.g. you are not within easy travelling distance of the datacentre)