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Drupal's 7 sites folder with its mysterious permissions and ownership

I have worked with drupal over a year. I've witnessed how drupal 7 can really kill the resourse. So now I have to work on a VPS server where everything I have to install myself. I've installed all the neccessary software on ubuntu server 10 and now I'm running drupal on it. The problem is that I had to give sites directory and all subfolders and files of it permissions 777 in order for drupal to recognize this folder and not redirect me to install.php page. But on a virtual hosting I noticed that sites is a protected folder and all of its content esspecially sites/default/settings.php with 550 permissions. I did not get the magic trick here, how does drupal recognized that folders. I have created drupal's folders and files both as root and other sudo users, but it did not help. And drupal still see only sites with 777 permissions. What should I do? I've been with this problem over a week and yet still do not know the answer. Thank you in advance, guys!