“ The environment in which a hosted operating system runs, providing the abstraction of a dedicated machine. A virtual machine may be identical to the underlying hardware (full virtualization) or it may differ slightly (paravirtualization).” www.linuxtopia.org/online_books/linux_virtualization/xen_3.0_user_guide/linux_virualization_xen_user_78.html
Today, security and encapsulation are the most important reasons for using VMMs
“… VMMs give operating systems developers another opportunity to develop functionality no longer practical in today’s complex and ossified operating systems, where innovation moves at a geologic pace.” 
Applications running on a virtual machine are more secure than those running directly on hardware machines.
VMM controls how guest operating systems use hardware resources; what happens in one VM doesn’t affect any other VM: “…by virtualizing all hardware resources, a VMM can prevent one VM from even naming the resources of another VM, let alone modifying them.”