Private servers can emulate the experience of an online game, but they allow you to change certain aspects of the gameplay for your own enjoyment. Sometimes you just really want to play an older version of the game, or include certain character or gameplay modifications, or even include custom items in regular gameplay. A private server allows you to create a custom-tailored gaming experience specifically tailored to your preferences. These kinds of servers are very widespread.
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Hosting a private server from your local PC is very beneficial if you are testing things on your own, if you are developing by yourself, experimenting, studying or just for sake of backup, but when you need to invite a few friends over this can be problematic. I mean, sure, you can always invite your friends over if you made your server public , but we all know that's not where you will want to host a public server. At least, not today. The down sides of hosting a server from your own PC Your PC can be the most powerful machine in the world, but it is not recommended to host a public server there. At least, not in big amounts. It doesn't mean your PC cannot handle it, just means that you will need to take a few things into consideration. While in theory this can be done, the costs of a good VPS or a good dedicated server are not that high and are no longer limited by bandwidth, so you can use them "freely". What's the difference? A dedicated server is the more powerful version of a virtual server, which is also more expensive. In reality, Virtual Private Servers are a virtualization of a specific operation system's environment, one instance out of many that are hosted through one single machine.