via http://www.living-it.co.uk/pages.asp?id=316

"Virtualisation is a way of using your IT resources more effectively. With servers, this means splitting the operating system and applications from the physical hardware used to run them. This creates a “virtual machine” which acts just like a physical one, but it is separate from the server it is running on. Each virtual machine contains the operating system, applications and data in a single ‘container’. Multiple virtual machines can then be run on a single piece of server hardware, with each machine isolated from one another and running independently. This means that the server does more work and spends less time standing idle."

"The biggest benefit is not having to buy a server every time you require a new application."