A virtual private server (VPS, also referred to as Virtual Dedicated Server or VDS) is a method of partitioning a physical server computer into multiple servers such that each has the appearance and capabilities of running on its own dedicated server. Each virtual server can run its own full-fledged operating system, and each server can be independently rebooted.
Total two kinds of virtualizations way one is software and second is hardware based.
In software based virtualization, the virtual machines share the same kernel and use the resources from main server. This type of virtualization mostly use in web hosting business.
There are plenty virtualization software such as Xen, Virtuozzo, Vserver, and OpenVZ (which is the open source and development version of Parallels Virtuozzo Containers).
In hardware based virtualization, the virtualization mechanism partitions the real hardware resources. In typical implementations, no burst and/or real-time quota modification is possible; the limits are hard and can only be modified by restarting a virtual machine instance.
It is more commonly used in enterprise/commercial deployments
Examples include Microsoft Virtual Server, VMware ESX Server, and Xen.