Shared hosting is right for a lot of people! It’s a great way to save money for other things that might be more important to you, but keep in mind that there are restrictions. A friend sent me a link to this video:
http://www.youtube.com/watch?v=0sWFgRIDliY&feature=relatedcrammed

That is exactly what shared hosting is. Hundreds if not thousands of websites are crammed on to one server, and for 99% of them it works. If your site receives a lot of visitors though, or if reliability is important to you than you should upgrade to a dedicated server. Just like this video shows, profitability to the hosting provider relies on getting as many websites on one server, and many times resources run short.

Zak