Virtualization is a good way to use and distribute system resources efficiently. The virtualization Layer is an additional abstraction layer between network and storage hardware, computing, and the application running on it. Usually you can run a single operating system per machine which can be very inflexible compared to the usage of virtualization. You may have unused hardware resources left on the machine, but you are forced to use it with your installed operating system. A machine with a virtualization layer can create other (virtual) machines, where you can install additional operating systems. In this case, you are independent of hardware for the operating system and the applications. You can use all your physical hardware resources and share it to many virtual machines running operating systems of your choice. The best option is to share all the available resources, which will lead you to increased efficiencies and decreased (hardware-)costs.
Virtualization can be applied to many system layers like the hardware level, the operating System level, and also the language (high-) level. At the hardware level (hypervisor architecture), the virtualization layer is the first software installed on the physical machine and has direct access to the hardware resources which enables better scalability, robustness and performance than a hosted architecture.
A hosted architecture means the Virtualization Layer runs on the Operating System. The operating system, in that case, works as the host and manages the physical resource management and the device support. The operating systems on the virtual machines are the guest environment.
At High-level language virtual machines, the virtualization layer also sits as a program on top of the operating system. It virtualizes a program specific machine definition, so any program in the same high-level language can run on it.
Main Advantages of virtualization:
VMware and Microsoft Hyper-V are known virtualization tools, but there a plenty more of them like xen, which is the basis of Amazons Cloud Service Amazon EC2, and VM Virtual Box for host/guest-architecture.
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Sharma, Nirmal (2015): First step in virtualization design: Understand the layers; http://searchservervirtualization.techtarget.com/feature/First-step-in-a-virtualization-design-Understand-the-layers