Linode is a standard VPS provider. I don't need "hosting" where the sites are on a machine with 1000 other web sites. I do high-end business-to-business sites that need to be available and very responsive. Because of using a variety of software pieces and having to run cron jobs and all that I also need access to the machine.
As for disk space there's no comparison between a service like Amazon S3 (or similar offerings from Google, Rack Space, et al) and a bunch of disk space. Disk space is actually pretty cheap, but Amazon's service level for S3 is something like 8 9s (literally). It's simply crazy. But it's what my customers expect. If someone hits a "play" link and the music doesn't play they'll move on to the next provider. I had a guy explain to me one day "if I have to wait 10 seconds I'm already on the next web site". He wasn't kidding. These folks work hard when they work and dead links are not acceptable.
Nothing's perfect, but with the right tools I can run a business offering a service level that would have been unimaginable 10 years ago, particularly for one or two guys.