For smaller hosting companies starting out reseller hosting is a affordable way of going as well if smaller companies that do other services but want to offer clients web hosting and do not know much about hosting they have this solution that they can utilize.
Well think about it like this, there are some people who want to learn. They don't just learn overnight, they have to start with something easy. And how? they can purchase a reseller hosting, cheap, easy to manage, not rocket science and also if they had a vps it would be alot more difficult.
Wrong. "Real" hosts use their own datacenters with their own fiber. See Google.
Arguing about what constitutes a "real" host is a pretty senseless (if not amusing) debate, since anyone can slide the scale anywhere they want. The important factor is to remember that from your average customer's perspective, a "real" host is defined by whether or not the customer's website works well. Your average paying customer doesn't care about datacenters or processor class or SAS vs SATA, they just want it to work.
To that end, it makes perfect sense for some startup hosts to use reseller plans. It's gives them the opportunity to minimize their operating overhead at first, and then expand as they grow.
I'm sorry to disagree with some people here, but I don't believe a "real" or "good" host is the one who has root access to their machines or not, I'd believe a real host is the one who makes his customers feel happy, care about their customers concerns, listen to their suggestion, provides good and high quality support and knows well how to manage the environment... and to be honest, you certainly don't need root access to accomplish that...
Very much true. A loyal and honest host, who gets people online, provides them friendly and timely support accompanied by a reliable network is what a true host is.
A host who's ego-centric, doesn't listen to his customer requests, doesn't provide great uptime and doesn't believe in "CUSTOMER DELIGHT" even if he has 10 42U racks, isn't a host!