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With virtualization there is a host machine installed on the hardware. This host emulates hardware for several guests (virtual machines). On such emulated hardware a complete OS install can be done. In the end there will be several machines running on one hardware machine. Some reasons to use this:

  1. Sharing hardware resources (a gigabit network card is often not fully utilized by one machine)
  2. Freedom to backup and move complete machines to another host (an image of a machine installed on hardware is often not fully compatible with the new hardware)

These documents are based on KVM (Kernel-based Virtual Machine).