A shared web hosting service is a web hosting service where many websites reside on one web server connected to the Internet. Shared hosting is a type of web hosting where a single physical server hosts multiple sites. Many users utilize the resources on a single server, which keeps the costs low. Users each get a section of a server in which they can host their website files. Shared servers can hosts hundreds of users.
Shared web hosting option is created for smaller websites which includes new bloggers, small businesses, etc. If every site used their quota, then shared hosting would not work. But since only very few do, it works out very nicely for everyone. Users get a very affordable deal