A virtual machine is a virtual computer within a physical computer, implemented in software. A virtual machine runs on a virtual machine host and emulates a complete hardware system, from processor to network card. A virtual machine typically consists of one or more virtual hard disk files (.vhd files) and other properties that are specified when the virtual machine is created.
For more information about virtual machines, see the “Virtual Machines” topic in the Virtual Machine Manager Help (available from the VMM Administration Console Help menu).