While the concept behind "virtualization" is simple to understand - the manner in which virtualization is acheived varies greatly among product and platform offerings. Understanding these differences is critical in determining the best platform for your conversion to a virtualized environment.
The original sense of the term virtualization, dating from the 1960s, is in the creation of a virtual machine using a combination of hardware and software. For convenience, we will call this platform virtualization. The term virtual machine apparently dates from the experimental IBM M44/44X system. The creation and management of virtual machines has also been referred to as creating pseudo machines, in the early CP-40 days, and server virtualization more recently. The terms virtualization and virtual machine have both also acquired additional meanings through the years.
Platform virtualization is performed on a given hardware platform by host software (a control program), which creates a simulated computer environment, a virtual machine, for its guest software. The guest software, which is often itself a complete operating system, runs just as if it were installed on a stand-alone hardware platform. Typically, many such virtual machines are simulated on a single physical machine, their number limited only by the host’s hardware resources. Typically there is no requirement for a guest OS to be the same as the host one. The guest system often requires access to specific peripheral devices to function, so the simulation must support the guest's interfaces to those devices. Trivial examples of such devices are hard disk drive or network interface card. The most common virtualization methods are explained below.
Multiple logical (or virtual) operating systems run (aka "guests") on top of a fully functioning base (or "host") operating system. This method of virtualization usually uses a standard operating system such as Windows or Linux as the host, plus a virtual machine manager, to run multiple guest operating systems. Some vendors and products providing this type of virtualization include Microsoft Virtual Server, SWSoft Virtuozzo, Parallels Workstation/Desktop, Linux jails, and Sun Solaris containers. With this type of virtualization, if the host operating system experiences a failure, all virtual "guests" will also fail.
Also known as "system virtualization" or "native virtualization", multiple virtual operating systems run directly on top of the hardware without an intervening operating system. Typically, virtualization software will run directly on the base hardware, and the operating systems will be installed onto that virtualization software. So-called "paravirtualization" is (arguably) a subset of server virtualization that provides a thin interface to run between the base hardware and a modified guest operating system. Examples of server virtualization include VMware ESX Server, and Xen. Each installed "guest" or "virtual machine" is completely isolated from other guests an the failure of one guest will not have any effect on the other hosted guests.
Users are provided with remote access to a complete desktop environment allowing access to any authorized application, regardless of where the application is actually located. Examples of this include Microsoft Terminal Services, VMware Virtual Desktop, and Kidaro Managed Workspace.
This information is meant to be a cursory overview of the current state of virtualization technology. Other types of virtaulization include application streaming and storage virtualization. More information can be found at VMware and through the sites listed below.
The above material was compiled from Wikipedia and Business Technology Quarterly.