Many internet people see hosting as little more than a necessary evil. Its something you need, but dealing with it is extremely unpleasant, in fact the only time it is considered by non-tech personnel is when it is not working properly. If these slowdowns are extended or chronic they can necessitate moves that are timely and expensive, extensive redesigning, and possibly serious investments. For smaller sites and personal blogs hosting is less of a problem, but as your site begins to grow the headaches can start, especially once you factor in traffic bursts, like from Digg, which can send a serious amount of traffic for 12 hours or so only to have things return to near their normal levels soon thereafter.
Traditionally, choosing your hosting solution was pretty basic- you could go with a shared hosting account (a lot of sites on one server) or a dedicated one (one site on one or more servers). This is a gross oversimplification and a lot of thought could be put into who does the hosting, what type of account you have, what kind of server, the operating system, how much control you have, and things like that. If you had a small site and did not need a lot of control you would go shared but if you needed power and/or root level access you would go dedicated. There is a lot more to it, like management and load-balancing, etc, but for most smaller sites that covers it.
Now though, things are getting much more interesting. People are still offering the traditional shared/dedicated accounts, but there are other options. Personally I hate to deal with hosting, but I am fascinated with what I see becoming available, many of which solve the problems I have had with a dedicated solution, eliminate the need for shared hosting, and challenge the traditional ways we have understood scalability. Personally I am most interested in grid/cloud computing and virtualization options. While they are not the best for all applications they not only reflect great advances in technology but also the future of web hosting.
These are definitely not your typical shared/dedicated solutions, but they can serve as replacements in many cases. For example MTs Grid, once they work out the kinks, could be the best shared-style hosting on the net for just $20 a month and it theoretically has the power to handle just about any site load so long as you want to pay the extra GPU charges. For higher demand sites, where you need root access and lots of computing power, there are options like Joyent and EC2, but these are for more advanced users and may require a lot of setting up. One key characteristic of all of these is the loss of user control when compared to a more traditional solution, like colocation. You are sacrificing total control of the hardware for the scalability of a grid. This also means that, because you are on a grid there there are aspects of shared hosting in that what happens to other sites can affect your account (this is generally true, regardless of what the sales people tell you).
This is a really interesting subject and one I could probably go on talking about for some time. Its amazing how the landscape of web hosting has changed yet some many sites are still going the traditional route (myself partly among them). I did not mention the impact of free hosting on sites like typepad and blogger, but those all play a major role in this. That is something to discuss in another post, but for the time being its definitely worth it to check out some of these sites and at least understand what they have to offer.