There are two main scenarios where VPS hosting can be preferred over dedicated server hosting.
1) Budget – VPS hosting is almost always cheaper than the dedicated server hosting
2) Scale as you go scenario – A VPS plan can be customized according to your needs and you can scale it as you grow. If you go for a full dedicated physical server hosting you might be paying a lot of extra money for the power and resources that you don’t even require ( or will never require in some cases ). Most VPS hosting plans are easily scalable and flexible.