Hi everyone.

I am just not too sure that what is co-location hosting and how does it actualy benefits. Does anyone has any experience in it?

co - location hosting is like hosting your site on two different servers for more bandwidth flexibility and security

its good but its too costly for small business

On the Internet, this term (often spelled "colocation" or "co-location") is used to mean the provision of space for a customer's telecommunications equipment on the service provider's premises. For example, a Web site owner could place the site's own computer servers on the premises of the Internet service provider (ISP). Or an ISP could place its network routers on the premises of the company offering switching services with other ISPs.

Colocation hosting provides you with flexibility, security, increased perfomance and cost savings. If you are looking total control and maximum flexibility you can colocate your own equipment in one of Data Centers.

A host server provides a virtual hardware or software platform for running one or more instances of software on a potentially different platform.

Very good answer. You described the theme completely.

This is the exact answer for colocation.

Colocation is a cheaper solution if you want to go for higher end server. For lower end server i recommend you to use dedicated server only.

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Nowadays also semi-dedicated server is available. Many companies offer this option.