I came across a Microsoft article which provides great detail regarding host named site collection.
Applies to: SharePoint Server 2013, SharePoint Foundation 2013
Topic Last Modified: 2013-12-18
Summary: Plan and implement host-named site collections in SharePoint 2013 and learn how path-based site collections might affect your environment.
Host-named site collections are the preferred method to deploy sites in SharePoint 2013. Because the Office 365 environment uses host-named site collections, new features are optimized for these site collections and they are expected to be more reliable. Learn how to plan for and implement host-named site collections, design URLs, and manage URLs.