What Is Co-location Hosting?
You may be well beyond the process of selecting which type of hosting is right for your current Web efforts, but (with any luck) you'll inevitably outgrow the hosting solution you are working with now and will eventually need something bigger, faster, and better - and colocation could be it. Co-location hosting is when one company or enterprise stores a web server at another company's location.
The facility where the server is stored is not just in some random location though, it's a facility dedicated to storing servers and will secure the area (either in cages or racks) where your server resides, regulate the power, and provide a dedicated Internet connection to your server. Co-location facilities offer backup power generators and multiple connection feeds to the Internet which ensure high availability - a necessity for Web-based businesses.
Another benefit of choosing co-located hosting is that it can reduce the long-term hardware expenses and supports costs but you must know how to administrate a server. If you are unable to administer the Web server and maintain it (and provide upgrades), then consider another form of hosting - like dedicated or (gasp) shared. If you feel confident that you can successfully administer your own server though, the benefits are numerous. Co-location allows for advanced customization (update or upgrade at your convenience) and provides for better performance overall because you can determine specifications for the hardware.
The downside to co-location hosting is that you must purchase (or own), maintain and update your equipment which can be expensive. Not having the funds readily available to support your co-located server or the knowledge necessary to scale your implementation could mean big problems down the road. If you opt to go with co-location, be prepared because ultimately you will be responsible.