In some respects cloud servers work in the same way as physical servers but the functions they provide can be very different. When opting for cloud hosting, clients are renting virtual server space rather than renting or purchasing physical servers. They are often paid for by the hour depending on the capacity required at any particular time.
With cloud hosting clients get the best of both worlds. Resource can be scaled up or scaled down accordingly, making it more flexible and, therefore, more cost-effective. When there is more demand placed on the servers, capacity can be automatically increased to match that demand without this needing to be paid for on a permanent basis. This is akin to a heating bill; you access what you need, when you need it, and then only pay for what you’ve used afterwards.