Low prices does not have to mean low quality, but you should perform your own due diligence when evaluating hosting companies.
There are many ways a hosting company can save on their operational costs. Some have been mentioned here - like overselling accounts on the webserver. But there are others, like:
1. Saving on hardware cost - eg clone vs. brand names
2. Outsourcing customer support can save some money
3. Not paying licensing fees
4. Limiting support hours
5. Not providing telephone support or limiting the support options
6. Lessen adding extra servers for things like Stats or SQL by installing them on the webservers instead of dedicated servers for these functions.
7. Lowering connectivity costs (eg DSL vs T1 vs T3 ...etc.)
8. Going with a dedicated server so not having to lay out server cost overhead.
9. Using an off the shelf hosting automation system rather than developing their own.
10. ...etc. ..etc.
Again, the list above are just some ways that hosts can lessen their operational cost and DOES NOT mean less quality service. These are all things to consider when you are doing your due diligence and you will need to weigh the pros and cons for your website needs.
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