Collocation and colocation are often spelled incorrectly, regardless of which term people are attempting to use:
In a normal web site hosting situation, a public web site owned by "Company XYZ" would reside on a server owned by their hosting provider and located at the hosting provider's premises. The hosting provider connects the server to the Internet, owns and maintains the web site server.
In a colocation situation, a web site owner places their own web site server(s) on the premises of the ISP or hosting company in a variation of the standard hosting agreement. In this agreement the web site owner also owns the physical server.
BHI specializes in Colocation services.