Cloud Hosting (often also referred to as clustered hosting or grid hosting) is a step up from the shared, virtual private or dedicated hosting systems that are used today.
By handling network security, load balancing and server resources virtually you are no longer restricted to the limits of one piece of hardware. This way, online operations are not limited to a single server, they access the processing power of a cluster of servers or a whole data center that are distributed in real time.

In a physical environment, a web site, email server or web application is limited to the resources that are housed within a server (RAM, processing power, storage, bandwidth etc). Cloud hosting no longer has these limitations ? you, can purchase as much processing power as you need from a virtually growing data center. The nature of cloud computing means that scaling up and down is seamless and therefore spikes in traffic and processor load wont cause any problems.
The load balancing happens at the software level and is dynamically balanced across your server cloud.
Servers can be added or removed from the cloud with no downtime on sites or applications meaning less or no disruption for customers. The cloud architecture has the ability to provide stability and resilience of a web hosting architecture that a few years ago only very large corporations could obtain.