Server virtualization is the act of running multiple operating systems and other software on the same physical hardware at the same time, as we discussed in Cloud Computing. A hardware and/or software element is responsible for managing the physical system resources at a layer in between each of the operating systems and the hardware itself. Doing so allows the consolidation of physical equipment into fewer devices, and is most beneficial when the servers sharing the hardware are unlikely to demand resources at the same time, or when the hardware is powerful enough to serve all of the installations simultaneously.
The act of virtualizing is not just for use in cloud environments, but can be used to decrease the “server sprawl,” or overabundance of physical servers, that can occur when physical hardware is installed on a one-to-one (or few-to-one) scale to applications and sites being served. Special hardware and/or software is used to create a new layer in between the physical resources of your computer and the operating system(s) running on it. This layer manages what each system sees as being the hardware available to it, and manages allocation of resources and the settings for all virtualized systems. Hardware virtualization, or the stand alone approach, sets limits for each operating system and allows them to operate independent of one another. Since hardware virtualization does not require a separate operating system to manage the virtualized system(s), it has the potential to operate faster and consume fewer resources than software virtualization. Software virtualization, or the host-guest approach, requires the virtualizing software to run on an operating system already in use, allowing simpler management to occur from the initial operating system and virtualizing program, but can be more demanding on system resources even when the primary operating system is not being used.
Ultimately, you can think of virtualization like juggling. In this analogy, your hands are the servers, and the balls you juggle are your operating systems. The traditional approach of hosting one application on one server is like holding one ball in each hand. If your hands are both “busy” holding a ball, you cannot interact with anything else without putting a ball down. If you juggle them, however, you can “hold” three or more balls at the same time. Each time your hand touches a ball is akin to a virtualized system needing resources, and having those resources allocated by the virtualization layer (the juggler) assigning resources (a hand), and then reallocating for the next system that needs them.

The addition of a virtual machine as shown above allows the hardware or software to see the virtual machine as part of the regular system. The monitor itself divides the resources allocated to it into subsets that act as their own computers.
Source: Michael Mendez, The Missing Link – An Introduction to Web Development and Programming (CC BY-NC-SA 3.0 License), Published by Open SUNY Textbooks, Milne Library (IITG PI), State University of New York at Geneseo.
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