This is a type of hosting in which a physical server is divided into several independent parts and rented out separately. One physical server can have several dozen virtual servers.
A virtual server can be compared to a townhouse or complex of private homes. These houses have neighbors, but each family has its own entrance and its own front garden. Do not read, but look at the virtual server.
A virtual server has no limitations like shared hosting. It can be freely configured to suit your project. You can even install your own software.
As in the case of virtual hosting, one physical server hosts several virtual servers. Each of them is isolated from each other. If one virtual server consumes a lot of resources, it will not affect other users.
This type of hosting is suitable for an online store, a forum with a large number of visitors, an application or a corporate site where customers and employees have accounts or personal mail.