VSS (Volume Shadow Copy Service, or Volume Snapshot Service), is a technology included in Microsoft Windows that allows taking manual or automatic backup copies or snapshots of computer files or volumes. The VSS captures and copies stable images for backup on running systems, particularly servers, without unduly degrading the performance and stability of the services they provide. This happens completely transparent to the overlaying NTFS.
By default, VSS shadow copies are saved onto the drive they are copying. However, you may want to save your VSS shadow copy to a different drive, perhaps one with greater capacity or redundancy.
On fileservers with high load on its disks, the additional I/O of keeping snapshots may impact performance (significantly).
In usual everyday-fileservers with a few users (~300 Users if your I/O ist reasonably fast), keeping it on the same volume may not be any problem. In todays virtualized environments, disk redundancy is no longer the guest operating systems problem.
Rule of thumb: VSS on the same disk is a lot better than no VSS at all - as long as you don't feel any performance problems (which is rare).