The term Reseller according to dictionary means to sell again i.e. to sell a product or service to public or to an end user, especially as an authorized dealer, while making sure that you make a profit on sale.
Reseller hosting is no different either, a reseller buys a Web hosting package from a hosting company and tries to sell it independently. The profit for reseller lies in either discount or in commission s/he gets from selling an account.
For example: The reseller might purchase a package whose features are valued at $100 for $90. So, reseller stands to make a $10 profit on selling package to customers. Normally as customers increase, so does profit margin for reseller.
Or, you can get some money by earning commissions from a hosting company. This happens when you refer potential customers to hosting company. If customer signs up with company then you earn a small recurring commission until customer uses services. Most web hosting companies try to outsource their services to resellers as it helps them to extend their business reach without cost of marketing and sales and also helps them to concentrate on business side of things.
What can be resold
As a reseller you can decide what kinds of services you can sell. You can provide shared, dedicated or co-location web hosting or merchant accounts, store fronts etc.
If you go with hosting then it might be useful to offer some other hosting related services like domain names, search engines etc.
Of course, if you have problems selling these value added services in beginning then you can sell them later.
The cost and resources involved
The cost of becoming a reseller and equipment and people required in order to be successful depends on many factors.
If you just plan to earn commission by referring people to hosting company by using Internet, then you do not have to put up a lot of money, all you need is an Internet ready PC and an Internet connection.
For a small start-up not a lot of money and resources are required. You can purchase a good reseller package from a hosting company by paying them some money upfront. All that is needed is a decent computer that can manage accounts of customers and a good Internet connection.
It is advisable to start small if you are very new to concept of web hosting and reselling. Then you can expand as you go on and start getting more and more customers in which case offering domain registration is also a very good way to make profits.