Virtual computers are programs that run on a computer that appear to be a separate computer. Virtual meaning imaginary, you will work with the virtual computer, but it really does not exist. There are a number of different uses of virtual computers today.
I use virtual computers in the classes I teach about operating systems. By setting up a virtual computer on the studentís computer they are able to install and work on an operating system on their computer but not affect what is on their machine. It works just like being on a separate machine; you see the normal boot up screens can format the virtual hard drive etc and good up and never affect the real machine. There are several programs out there that make virtual machines. VMWare is the oldest and does not have a free copy. Virtual PC is made by Microsoft and is available free. Virtual Box is free and made by Sun/Oracle. On all three you can run the different Windows operating systems, DOS, and Linux.
Virtual computers are also used in the IT centers of many companies for servers. As the memory capabilities and storage sizes have grown tremendously we do not need as many servers. However since most centers were set up on many servers, instead of redoing the IT architecture, organizations have chosen to put several former servers on one server using virtual servers. The popular software for this is VMWare and Virtual Server is made by Microsoft.
Windows 7 using Virtual PC as a way to allow people to run Windows XP on Windows 7 and keep their old applications. However the limit is that you are running the XP applications separate from 7. My experience with Windows 7 so far has been I did not need to use the virtual machine to run XOP applications. All I have used work on 7 as they did in XP, except XP (or Vista) utilities will not run on 7