As the word colocation itself says, colocation means combined (shared) location. This idea has been implemented with web servers by major hosting providers. This article explains What is the Colocation Hosting and Server?

Definition:

The hosting, in which we can use our own server at the place of the data center is known as colocation hosting and the server is known as colocation server. The Colocation hosting is also called colocation, co-location or co location hosting.

In this concept users place their own server at the data center. The hosting company preserves the connection to the Internet and arrangements with environmental details such as high security, managed server solution, high-redundancy, fire controls, uninterruptible power supplies (UPSs) and controlled air temperature. On the other hand, the owner of the server is responsible for that server's maintenance.

Benefits of the colocation hosting:

[1] You can achieve the greatest flexibility.
[2] You can select the hardware configuration of the server, the accessories and software.
[3] The access of the server is handled by only the owner of the server.
[4] You can utilize whole server rather than a little space of a shared server.
[5] You also get the high speed performance and reliability.

When you ready for colocation hosting, you must assure about security of the server, backup power generators and 24/7 monitoring.

-Alex R.