how does a hosted system work?

Answer 1

Typically, a company provides the hardware, software, support, and physical location and you pay them for that service depending on your needs.

For example, an individual may have a personal web site hosted by some company. That person could provide the web source to the provider who would then host it on a shared server along with many other sites. The provider would provide the web hosting service, DNS, email, etc. all from their machines.

Offerings and services vary by provider. The above is one common, simple set up that you may see. Others could be much more complex (and costly) for companies with greater needs.