Dedicated hardware typically has a large upfront cost. Also, it's a fixed resource, so for some workloads the "cloud" is more flexible (whether that be simple VPS's with quick provisioning a la DigitalOcean or AWS).
From what I understand the overhead in performance is negligible, while giving you very fine grained control over your resources. Say you have a web application, a front-end reverse proxy, a database, a cache, a background worker process, and a message queue. Throw all these components into separate containers on a single server while the load is low. Then move the DB container into a separate VPS as your traffic grows. Or try doing an upgrade of the message queue in a brand new container, and if it fails, just don't use it.
Sure, you can do the same thing with a VPS, but then you are paying the per-hour fee for it, while 99.99% of its resources will go unused.
From what I understand the overhead in performance is negligible, while giving you very fine grained control over your resources. Say you have a web application, a front-end reverse proxy, a database, a cache, a background worker process, and a message queue. Throw all these components into separate containers on a single server while the load is low. Then move the DB container into a separate VPS as your traffic grows. Or try doing an upgrade of the message queue in a brand new container, and if it fails, just don't use it.
Sure, you can do the same thing with a VPS, but then you are paying the per-hour fee for it, while 99.99% of its resources will go unused.