VM migration allows the transfer of virtual machines between physical servers while they are powered on (live migration) or powered off (cold migration). Live migration enables maintenance without disrupting service and helps balance server loads. It works by transferring a VM's memory, processor state, and devices from one host to another over the network in milliseconds without users noticing. Cold migration simply moves a powered-off VM's configuration files and disks to a new host. Both types simplify administration and improve hardware utilization.