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Shared hosting is way cheaper than dedicated servers thus many sites opt for shared servers, specially if your site is low budget, that's almost the only way to go.
By default a shared hosting comes with a shared ip. That means your website will share same ip with some 20 to 400 sites depending your hosting costumers amount and policies.
One negative aspect of shared ip is you don't control who is your neighbor, so perhaps you are sharing ip with spammers and others and surely that will have an impact on your rankings.
Buying a dedicated IP in a shared server may cost 2 or 3 dollars monthly aprox. Buying a dedicated IP will not transport you to a dedicated server (remember we said a dedicated server is expensive let's say from U$50 monthly and above, against U$4 and above for shared).
Buying a dedicated IP will just take you off the neighborhood. You can check your site neighborhood [myipneighbors.com] with some tools.
Anyway your site files will not be in a unique server where only you host files. The server will still be shared.
Correct me if I'm wrong.
PS: One thing that suprised me was to hear one hosting company saying your email smtp will still be shared with others regardless you have a dedicated ip or not. I expected the purchase of dedicated IP stop that, because is very annoying to suffer due to other's spam.
You can get a virtual server (shared hardware/dedicated software) on a shared box and have your own IP and SMTP software... that is probably the next step up before getting your own actual dedicated server/hardware.
One hosting company says about dedicated IP on shared server: Having a dedicated ip will have your account specifically assigned one ip address. You will be able to view your website through the domain name, or by typing in the ip in the web browser. This will not increase the server performance. The ip is required if you plan on having private SSL setup on the server. Private SSL is usually demanded if you plan on doing any credit card processing online."
Also, don't give search engines too little credit. If your shared IP is on a block known to be a shared host you may be granted some immunity from your neighbors once your site is established, proven... aka trusted. Search engines WANT to find good sites, even if they have lousy neighbors.
request for a different C class address
Different from what? Your dedicated IP is always going to be in someone's neighborhood, unless you own the entire C class.
As for my opinion on the many myths surrounding dedicated IP hosting, I posted in this thread [webmasterworld.com].
[edited by: jdMorgan at 2:01 am (utc) on July 4, 2009]