512MB RAM / 20GB SSD Disk starts at just $5/mo now! =]
Tor protects you by bouncing your communications around a distributed network of relays run by volunteers all around the world: it prevents somebody watching your Internet connection from learning what sites you visit, and it prevents the sites you visit from learning your physical location. Tor works with many of your existing applications, including web browsers, instant messaging clients, remote login, and other applications based on the TCP protocol.
I'm looking forward hearing from you!
Unfortunately it has generated a bit of abuse so we are considering revising our AUP to no longer allow Tor traffic.
With something like that you are usually best of running on dedicated hardware just to ensure everything is segmented. That's just based on what we've seen in the real world from customer usage.