A virtual private server (VPS, also referred to as Virtual Dedicated Server or VDS) is done by splitting a server so that each virtual server can run their own full-fledged operating system, and main thing is each server can be independently rebooted. Since a VPS runs its own copy of its operating system, so user can have superuser-level access to the operating system instance, and can install almost any software that runs on the OS.

Virtual private servers bridge the gap between shared web hosting services and dedicated hosting services, providing independence from other users of the VPS service in terms of software but at a lower cost than a physical dedicated server.

The physical server generally runs a Hypervisor which is tasked with creating, destroying, and managing the resources of "Guest" operating systems, or Virtual Machines. These guest operating systems are allocated a share of resources of the physical server, generally in a manner where guest is not really aware of any other physical resources save for those allocated to it by the hypervisor.

The Guest system may be fully paravirtualized, virtualized or a hybrid of the two. Incase of a paravirtualized environment, the guest is aware of the hypervisor and interfaces directly with the host system's resources, with the hypervisor implementing real-time access control and resource allocation. Incase of a fully virtualized environment, the guest is presented with an emulated or virtualized set of hardware and is unaware that this hardware is not strictly physical. The hypervisor in this case must translate, map, and convert requests from the guest system into the appropriate resource requests on the host, resulting in significant overhead. Almost all systems can be virtualized using this method, as it requires no modification of the operating system, however a CPU supporting virtualization is required for most hypervisors that perform full virtualization.

Hybrid or partial paravirtualization, can be called as full virtualization, but in which the guest uses paravirtualized drivers for key components such as Networking and Disk I/O, resulting in greatly increase I/O performance. As such, it is a common solution for operating systems which cannot be modified (for various reasons) to support paravirtualiztion.