running an OS software layer on top of another software layer, rather than on hardware directly


The traditional computer setup involves some software — including an operating system (OS) to provide basic user needs — running on some physical hardware. Dual- or multi-boot setups allow multiple OS's to share hardware, but with only one running at a time. Virtualization breaks the traditional boundaries of hardware and software by allowing one OS to run inside another, with the outer (real) OS handling sharing/emulation of hardware, "writing" to disk, etc.

The advent of virtualization has created a market for virtual private server (VPS) providers such as Linode. Virtualization offers great efficiency and flexibility, and scales extremely well. As with car or bike sharing, only a fraction of the users have heavy resource needs at any one time. Further, if one piece of hardware in the pool requires maintenance, its users can be easily shifted to others.