You lease space, power and connectivity in a colocation facility. Inside that space sits hardware you own or lease directly — GPUs, storage, networking — running an open-weight model and the serving stack around it. The facility provides the building, the power, the cooling and the physical security. Nobody else's workload runs on your accelerators, and no other tenant shares your memory.
The distinction from cloud GPU rental is meaningful and frequently blurred by people selling the latter. A cloud GPU instance is a slice of somebody else's fleet, allocated to you for as long as you pay, on hardware that also serves others and in a control plane you do not own. A colocated machine is your machine. You know its serial number. You can specify who is permitted to touch it and you can require that access be logged. For a regulated organisation those distinctions are easier to evidence to an auditor than a shared-tenancy assurance.
The distinction from on-premise is equally clear. The hardware is not in your building, so someone else provides the power redundancy, the fire suppression, the cooling and the physical guarding — all of which are expensive to build and unglamorous to maintain. You get most of the control of on-premise without the capital project.