To help you choose, we have included both a non-technical explanation, and a non-technical analogy below. In the analogy, we compare the different types of hosting plans with an Olympic-sized swimming pool. To get a full understanding, you may want to read both.
Shared Web Hosting
This is the basic type of hosting which most people will want. You will be able to host more than one website and enjoy HostGator's award winning 24/7/365 support available through phone, email and live chat. Our support agents are never outsourced; everyone you speak to works in the United States of America.
This type of plan is designed to make you your own hosting company. If you want to sell hosting services for profit, then you want to be a reseller. We also recommend this type of hosting if you have more than one e-commerce website, and need more than one SSL certificate, because each SSL requires its own cPanel. You will still be able to host more than one website and enjoy HostGator's award winning 24/7/365 support available through phone, email and live chat.
The main point of upgrading to a VPS from a shared or reseller account would be for flexibility in software installations, Apache configurations, and other custom software (ventrilo, ffmpeg, etc). A VPS also provides more freedom to send emails and stream media. A VPS is not a solution to an overly resource-intensive account.
This is the most powerful type of hosting, which meets the requirements and needs of big businesses. Dedicated server owners are allowed to sell hosting services for profit, and you can choose the server specifications and environment. If you have heavy traffic, a very popular site, or a large customer database, then consider Dedicated Hosting. A dedicated server also provides more freedom to send emails and stream media. You will also be able to host more than one website and enjoy HostGator's award winning 24/7/365 support available through phone, email and live chat.
Think of a hosting server like an Olympic-size swimming pool. Not everyone needs an expensive, giant Olympic-size pool. So, it's nice to have cheaper options which may suffice.
With Shared Web Hosting, you get to use the entire Olympic-size swimming pool; however you must share it with other swimmers. This means you won't always get to enjoy the benefit of using the high dive because you may have to wait behind someone else while they dive. You won't always be able to swim laps without someone getting in your way. However, sometimes the number of swimmers may be very few (like in the middle of the night) and you have a little more privacy and room, but those other swimmers will surely be back, and they can come swim in the same pool you use whenever they want. Also, the pool owners may have rules like no running and no bringing your entire extended family to take up the entire pool and not leave room for anyone else. If someone does a cannonball, you might get splashed, but the disturbance would be temporary. If that swimmer continually does cannonballs and disturbs other swimmers, then that swimmer would be asked to stop doing cannonballs or asked to get their own pool.
This is similar to how a shared server works; you share the resources with other users, but you can still enjoy a large amount of resources when no one else is using them; and the hosting company will also post rules to make sure every user has a fair amount of resources when needed.
Reseller hosting is exactly like Shared Web Hosting, except you are allowed to require a cover-charge to your guests if they want to swim. You get to keep all the profit, but you must be responsible for your guests behavior, and you must make sure your guests follow the rules of the pool owner.
With VPS Hosting, you get to use a roped-off section of the Olympic-size swimming pool, and you do NOT share your section with other swimmers. This means you won't ever get to enjoy the benefit of using the entire pool, but you will have your section completely to yourself. In this case, you won't have to wait for other swimmers to get out of your way. Also, the pool owners will have more lenient rules since you aren't sharing your section of the pool with anyone else (so, you can have as many people as you like as long as they stay in your section). If someone does a cannonball in their own section of the pool, you won't get directly splashed, but it is possible you may feel some ripples in the water.
This is similar to how a VPS container works; you get your own resources within your own container, but you still share the server with other users. The other users don't get in your way or see your part of the server, so you have much more privacy and freedom to do what you want. However, you will never have the full power of the server at your disposal.
Dedicated Server hosting is like owning the entire Olympic-size swimming pool to yourself. You won't have to follow someone else's rules about sharing and running. You can paint the walls purple, add lawn chairs and do as many cannonballs as you want. It's the best solution for any of your swimming needs, but if you always swim by yourself or only need enough room to practice diving, then you may not need an entire Olympic-size swimming pool.