Difference between dedicated and shared server configuration:

In order to communicate with oracle database, oracle users need a program such as SQL *Plus which can issue SQL statements and few processes which can execute these SQL statements. These processes are divided into User Process, Server Process and Background Processes. User process runs user application like SQL *Plus. Server process manages oracle user process’s requests. Server process executes SQL statements and returns result to user process. Background processes are the core of oracle database which handle over all database operations.

Dedicated server connection:

A dedicated process has one to one relationship with user process. The user connected with dedicated server connection has the dedicated resource that is whether or not the user is doing work the connection remains allocated to that user. Thus if your user is not working and if there is less network resource then this user is blocking another user to connect or to execute the user request by making this user works queued. This connection is preferable when you have lot of resource or to some administrative user like "SYS" , "SYS" for administrative works and for batch jobs,

Shared server connection: 

Shared server architecture consists of Listener Process, Dispatcher Process, Request Queue, Shared server process and Response Queue. Network Listener process listens the user process request. If user process request requires a dedicated server process, listener process starts a dedicated server process. If the request can be assigned to a shared server process, then the request is forwarded to dispatcher process. Shared server configuration requires at least on dispatcher process. Dispatcher process places the request on request queue. Request Queue is created in SGA and shared by all dispatcher processes. On of free Shared server process picks up the request from request queue. After processing the request, shared server process places the result in response queue. Each dispatcher process has its own response queue in SGA. Dispatcher knows about the user process which placed the request, so the response is returned back to user process.

When there is shared server the user connection is shared, that is user is connecting by dispatchers and when a user is idle his resource can be used by other users, thus lessen the load on system, this is more likely in a environment where user is mostly idle, like in a order entry system.

So, what should I choose?

If your environment is OLTP then shared is preferable because the tasks need short time. Whether is Warehouse, OLAP, Data Mining the users are running time consuming and heavy load query where it is best to use dedicated server.

How to configure a shared server configuration?

Below are the two links that helps in configuring the same.

http://www.exploreoracle.com/2009/07/22/configuration-of-oracle-shared-server/

http://ora10g.com/4_6_sharedserver.html