Virtualization allows multiple operating systems to run simultaneously on a single computer by transforming hardware into software. It works by installing a virtualization layer, either using a bare-metal hypervisor that does not require an operating system or a hosted hypervisor that runs as an application on an operating system. Each operating system runs within an isolated virtual machine, which appears like a separate computer to users but shares the physical resources of the host computer. Different types of virtualization include full, para, and OS-level virtualization. Virtualization enables server consolidation and transformation of physical servers for multiple applications.