A virtual machine is a computer application or file (typically called an image) that behaves like an actual computer. It runs on your current operating system in a window on your desktop to allow you to experiment with different operating systems, just like you would on a real, physical machine.
As with a physical machine, virtual machines have their own virtual hard drive – a large multi-gigabyte file stored on your hard drive which includes hardware, a virtual CPU, memory, network interface and other devices.