Moodle uses more resources than say, a basic blog or homesite, but that's largely because it's a lot more complex. There are also a lot of new features in 1.2 dev which are yet to be optimised (eg the text filters).
Hosting companies with $5 accounts typically squeeze betewen 200 and 300 accounts onto a single server. They have to so they can be profitable. As a result they are very sensitive to load issues.
Moodle.com (for example) runs under 20 average Moodle sites on a typical machine, and that's with everything tuned towards running Moodle as fast as possible.
Hardware and performance
Totalchoicehosting - a word of warning.
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