Good questions, Usman.
Here is part of the message that I got from GoDaddy about 12/2010.
"And to clarify, the hosting service I recommended you to upgrade to is called 'Virtual Dedicated Server', not Grid hosting. The reason is because Grid Hosting is still shared-hosting service, similar to what you've using, in which MySQL databases are limited to 200 MB in size."
I am not sure what the current limit is.
Just the other week, I got an email from my Bluehost hosted server, complaining that I was using too much of their "unlimited" hosted server. Here are the specs that Bluehost gave me.
One Free Domain for First Year
Emails sends per hour = 750 (18,000 emails per day)
Total mySQL databases = Unlimited
Single Database Size = 2GB
Total Database Tables = 1000
Total File Count Limit = 200,000
Bandwidth Speed = 15Mbs
You and I (and others) know that nothing is "unlimited", right? By the way, Bluehost's complaint was that I had exceeded my total database tables limit (well, I had three moodle installations, a WordPress, and a Magento installation. Not really all that much.