I develop on a private dedicated localhost server, namely the sole computer I own. Using XAMPP I just boot the server parts I need, when I need them, and work away. However, I test on a shared server.
__________________ Programmers are in a race with the Universe to create bigger and better idiot-proof programs, while the Universe is trying to create bigger and better idiots. So far the Universe is winning. - Rich Cook
I develop on a MAMP setup with a local windows-based (WAMP) server for testing things occasionally (I can do load testing on there over the network whilst working happily on the Mac). Out in the big, wide world I have regular shared hosting for some sites and a VPS for some others that need more than shared hosting can provide.