Virtualisation is an abstraction of the hardware seen by the guest operating system.
Virtualisation of physical servers provides a means to reduce costs associated with hardware by allowing multiple server instances to share the underlying hardware of a single server. As a large proportion of servers in the datacentre are underutilised, using only a fraction of their CPU, and memory resources, a large number of these machines could potentially be consolidated on to one platform. The result is better utilisation of resources and hardware.