Question:
A cheap’ web hosting company hosts my site but, by the price of it, also may be hosting numerous spammers, scam sites, or other banned sites like Gambling and or Porn. (But for less then 10 bucks per month they'll give you 5000 MB and unlimited domains!). Does that affect my rank and does it risk my website?

Answer:
The answer in plain words is Yes.
There are certain situations like if the domain sharing your server and IP is penalized by Google and other search engines on account of spamming then your website is also expected to be banned or penalized. Another situation can be that your website is residing on the server containing illegal adult content, and that site too is on the hit list of Google and other search engines resulting in your website to be banned too. But it is never taken for granted that if such co incidence happens then your website is surely affected because it is common sense that for a mistake by one person another one cannot be punished. Still to be on the safer side certain points should be made clear while hiring a web host.
(Excerpt taken from DevwebPro, Feb., 2004)

A number of engines no longer index pages residing on many common free web hosting services. The common complaint from the engines is that they get too many "junk" or low-quality submissions from free web site domains. Therefore, they often choose not to index anyone from those domains or they limit submissions from them. It's always best to buy your own domain name (very important) and place it on a respected, paid hosting service to avoid being discriminated against.
(Excerpt taken from Site Pro News, May., 2004

While we can offer the same price as those cheap hosting companies,

• We do not host spammers, gambling or porn sites. Therefore our servers will not prevent your site from being added to search engines!
• We do not over subscribe our servers to compensate for giving away un-needed storage space - no slow downs or bottlenecks.
• We have made the investment in quality severs, software and bandwidth.
• Customer service is always available. 877-233-3287

Remember-"you get what you pay for".