With virtualization, a physical server’s resources — CPU, memory, storage — are shared between several virtual machines (VMs). Each VM has its own operating system and applications and is isolated from the others.
This way one server can run a file server, an accounting database and a test environment separately. Copying and restoring a virtual server is also easier than a physical one.
Example
Instead of several old standalone servers — one new server where each application runs in its own virtual machine.