A Virtual Machine (VM) is a software-based simulation of a physical computer. It runs an operating system and applications just like a real computer, but it operates within a host system. This allows multiple VMs to run on a single physical machine, sharing its resources such as CPU, memory, and storage. VMs are commonly used for testing software, running different operating systems, and improving resource management in data centers. They are created and managed by hypervisors, which allocate resources and ensure that each VM operates independently without interfering with others.