Hypervisors can be broken down into two general categories: Type 1 and Type 2.
Some refer to a Type 1 hypervisor as a "bare metal" hypervisor because it installs and interacts directly with a host computer's hardware. The hypervisor acts as its own operating system and each virtual machine (VM) -- or "guest instance" -- runs on top of the hypervisor. By eliminating a host operating system and running on hardware, the hypervisor provides excellent performance and can support a large number of VMs without any performance degradation.
Typically, a Type 1 hypervisor such as VMware ESXi is deployed on servers in the data center. For example, an enterprise would virtualize a server to create and host numerous client-server enterprise applications or IT services on the same physical server. This allows computing resources to be maximized rather than using one server for every application or service, such as DHCP.
By comparison, a Type 2 hypervisor is a "hosted" hypervisor because it installs and runs on top of an existing host operating system, and each guest instance or VM runs above the hypervisor. Although the addition of a host OS layer can potentially limit performance and expose possible OS security flaws, the convenience of a known host OS can ease system configuration and management tasks which can be particularly helpful for end users.
Type 2 hypervisors, such as VMware Workstation, are deployed on endpoint devices like workstations, PCs and laptops. These systems typically don't require large numbers of high-performance virtual machine instances, usually hosting a small number of VMs for compatibility or functional testing. For example, a software developer might use a Type 2 hypervisor to create a Linux VM on their Windows PC in order to test a Linux software build. The VM can then be modified or removed as desired.
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