Vertical scaling (scale up): Add more power to one machine. More CPU, more RAM, bigger disk.
Horizontal scaling (scale out): Add more machines.
Vertical scaling is simpler but has limits. The biggest server in the world still can't handle billion users.
Horizontal scaling is harder (you need to distribute work) but has no ceiling. Netflix, Google, and Amazon all scale horizontally.
In interviews, assume horizontal scaling for any system serving millions of users.