To have a Web site on the Internet you first need to have a Web server. Unfortunately, owning a Web server can be very costly and requires technical expertise that most businesses don't have. This is where Web Hosts come in. Web hosting companies provide the equipment and other technical resources that you need without the headaches that come when you have to do it yourself.
Think of a Web Host as the landlord of a building. A landlord rents out stores to various businesses. Each business decorates and runs their store differently, and doesn't worry about the maintenence of the building. In a similar way a Web Host rents out space on a Web server, (or entire Web servers if you choose dedicated server), to various businesses. Each business builds their own Web site and never has to worry about the maintenence of their Web server.
In other words, the Web Host provides the place on the Internet where your Web site lives. It's a lot cheaper than buying you own server, and you don't have to hire the technical staff to take care of it.
The server is a physical object like a computer, in fact servers often link to computers, much in the same way as other peripherals do.
You can find reviews of webhosts for Xoops users in the Xoops hosting forum