Virtualization allows multiple virtual machines to run on a single physical server, improving resource utilization. It provides benefits like partitioning resources between VMs, portability by saving VMs as files, and security through hardware isolation. A hypervisor manages virtual resources and presents virtual machines to guest operating systems, allowing virtualization of CPUs, storage, and networks. Common hypervisors include VMware ESXi, Hyper-V, KVM, and Xen, which run directly on hardware or on a host operating system.