In computing, virtualization means the act of creating a virtual version of something, including virtual hardware platforms, operating systems, and computer network resources. It began in the 1960s, as a method of logically dividing the system resources provided by mainframe computers between different applications. Later, it was broadened.
Hardware virtualization or platform virtualization refers to the creation of a virtual machine that acts like a real computer with an operating system with its own resources. Softwares executed on these virtual machines are separated from the underlying hardware resources. For example, a computer running Microsoft Windows may host a virtual machine with other operating systems like Centos. Nowadays hardware components also help to maximize the efficiency of virtualization. Intel provides CPUs that support virtualization in hardware. They are called Intel? VT.
One of the best advantages of virtualization is that it's cost efficient. You can easily host several operating systems on a single server. Any security concern you may have are also covered as the can have a separated virtual machine for a single application without it affecting either your database or web application server.
The key benefits of Virtualization are Partitioning (running multiple operating systems and providing divided system resources), Isolation (Preserving performance through resource control and fault/security isolation at the hardware level), Encapsulation (Saving an entire state of the virtual machine to files and easy migration).