Colocation or Co-location or Collocation is the putting in of your server into a Hosting Company rack.   You provide the hardware which is the server, configure the OS and everything.  The Hosting Company will rent the space typically in terms of the number of Us to you.    Most colocation comes with power supply and NIC port with Internet connection and fixed IPs.

One important warning with regards to colocation is that the equipment is yours.  So you need to get a reliable colocation partner that has been in the market for sometime.  You do not want your colocation provider to disappear together with your server or equipment.