What is a dedicated server?

A dedicated server is normally used to host websites and other server based applications and is termed "dedicated" as you have complete control and 100% use of the server (unlike vitual servers which are normally shared).  Your applications have full use of 100% of the servers memory, disk space and CPU.

Why use a dedicated server?

As you have full control of the machine you can install any applications that you may need and customise them to your exact requirements for example you may wish to install a MySQL database server.  As your applications will be able to access 100% of the servers resources these generally perform better than virtual servers and there is no risk of other clients applications interfering with your own.  You can also upgrade the hardware as you require  and add servers easily should your requirements need it.