My Drupal powered website was until recently hosted on a shared server that was brand new, and had few other websites on it - so it was reasonably fast. Then I saw an ad over on the website for the "Advanced Forum" module, touting a place called HotDrupal.com - so I went over and checked it out. I liked what I saw, so I spoke to the guy over the phone, and he confirmed that their MySQL databases are hosted on the same server as the one serving your webpages (critical for speed, rarely found in shared hosting). So I took a chance, and moved my site to them. I was dumbfounded at the difference in speed! My site was noticeably faster! So if you run a Drupal powered website - you might want to wander over and take a look. They don't offer any affiliate program, so I get nothing for this recommendation... but I'm quite sure that unless you have a dedicated server, you'll be better off if you switch to HotDrupal.
I don't have any connection to HotDrupal whatsoever... I was on the phone with the guy for a few minutes, and I now host a site there. I'm just a little thrilled at how much faster my site is now - and just thought I'd pass it along. HotDrupal has no affiliate program, I make absolutely zilch if you go take a look and decide to buy. Unless you tell me, I'd never even know. But yes, I must admit that this is exactly what someone might try to do as 'creative' advertising. But I'm not even in the same country as HotDrupal.
Yes having the MySQL server on 'localhost' tends to be a bit faster than using a remote host for the database. Our host always uses local MySQL hosting and I've never really thought about until I read this thread.
If my site was just a 'bit' faster, I'd have never commented. The speed difference I saw was dramatic. I was hosting on a fairly new shared server with only a few others on it - and it's a big name in hosting business (no need to give their name on a post like this). I ran the 'devel' module on my site, and it told me that there were 268 MySQL database queries just to show the home page. So if you squeeze even a little bit better peformance out of the database, any CMS that heavily utilizes it is going to improve.
Did you ask someone from another part of the country/world if they noticed an improvement in performance. It may or may not be what you think it is.