Actually webhosting means if one compares the web to land hosing is the place where your office or website will be placed. Server is the computer which stores your website files and allows them to be viewed on clicking the link to your site.
With free hosting out of question for business and dedicated hosting being too expensive, shared hosting is the only and good option for home business. As the name suggests, in shared hosting your site is stored with many others unlike dedicated hosting which stores only your site.
This is the space on hard disk of your server that will be allotted to your site. Without graphics a typical web page occupies 40 - 50 Kb. Now 1000 kb = 1 MB. Allowing space for graphics too and need for any future expansion anything between 50 -100 MB should be good enough if you are not running a flashy website.
A very important aspect and often overlooked. This is the amount of actual data that can be transferred from the web server that holds your website. This lets you formulate an e-mail address on your site address e.g. anything@ your sitename.com where anything can be support, live support, help, info, subscribe etc. So these are the main things through which you can make things according to your demand.