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Yes a dedicated server by definition is a server that has only 1 site on it OR is dedicated to a specific purpose (ie a database server only).
Is it a must? Well depending on the level of traffic the site gets and the level of control you want over the server a dedicated box may be benifital. For example on a shared server you will have any number of other sites all on the same box using the same resources your site uses. For a low traffic site this isnt a big deal but as your business grows in importance and its web existance becomes more critical the desire to have a greater control over the server and its resouces is higher. On a shared server any transgretions by any other domain could affect your site. IE a reboot, security compromise, or in the worse case a total shutdown of the server.
It is usually not possible to switch with a simple click. Switching would be just as involved with a dedicated server as it would be going to another shared server. You would need to download all your files and your databases and upload them to the new server and then make the approprate DNS changes and wait for that DNS change to propogate.
The number of visitors isnt the real driving factor for a dedicated server. its the overall server load by your site and the desire to have full control over the server speed (another site wont sap resouces from you) and a dedicated server would put the responsiblity of security on your sholders (unless you went with a managed ded server).
The cost of the server will vary greatly. I have seen dedicated servers for as low as $50/month or as high as $500+/month. The cost will partially depend on physical configuration. Does it have a celeron processor, pentium 4, dual pentium 4's or even quad processor. Does it have 512, 1gb, 2gb or 4gb of memory. Do you get unmeatered bandwidth or do you have a fixed limit and what the limit level is set at can affect the price. Is the service managed or unmanaged? An unmanaged service puts the responsiblity of daily server upkeep on you. A managed server puts the responsiblity on someone else. Managed services always cost more.
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