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 machine. Each virtual server can run its own full-fledged operating system, and each server can be independently rebooted.
The practice of partitioning a single server so that it appears as multiple servers has long been common practice in mainframe computers, but has seen a resurgence lately with the development of virtualization software and technologies for other architectures.
The physical server boots normally. It then runs a program that boots each virtual server within a virtualization environment (similar to an emulator). The virtual servers have no direct access to hardware and are usually booted from a disk image.
There are two kinds of virtualizations: software based and hardware based. In a software based virtualization environment, the virtual machines share the same kernel and actually require the main node's resources. This kind of virtualization normally has many benefits in a web hosting environment because of quota incrementing and decrementing in real time with no need of restarting the node. The main examples are Xen, Virtuozzo, Vserver, and OpenVZ (which is the open source and development version of Parallels Virtuozzo Containers).
In a hardware based virtualization, the virtualization mechanism partitions the real hardware resources. In typical implementations, no burst and/or realtime quota modification is possible; the limits are hard and can only be modified by restarting a virtual machine instance. This kind of environment is potentially more secure in the sense that it is less subject to "Quality of Service crosstalk" between VM instances; on the other hand, its security is typically dependent on the correctness of a larger and more complicated Trusted Computing Base. It is more commonly used in enterprise/commercial deployments. Examples include Microsoft Virtual Server, VMware ESX Server, and Xen.