Ok, I'll try to explain this in a way newbies can understand...
Imagine a bunch of computers (Like the one you're using right now) on a rack.. and each of these racks can hold let's say.. 50 computers. Each of these computers are called ''nodes''
And let's say you buy a VPS running Windows 7. Well. The host installs Windows 7 on a virtual machine on that server and allocates a certain amount of RAM and HDD space for your use. You can then access that virtual machine with remote desktop or teamviewer.
You can do everything on that VPS as you would be able to do on your very own computer.
And that was my shitty attempt to explain something technical in a simple manor..