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Virtual machines are software-based emulations of physical computers that can run operating systems and applications as if they were physical machines. They allow multiple operating systems to run on a single physical machine, enabling more efficient use of hardware resources and easier management of software environments. Virtual machines are commonly used for testing software, running multiple operating systems on a single computer, and providing cloud services. They are created and managed using virtualization software, which allocates resources and manages the interaction between the virtual machines and the physical hardware.