To create a Virtual Dedicated Server (or Virtual Private Server) you take a physical server and use software or hardware virtualization to create a number of “virtual machines” on the physical host server; these are virtual servers, each possessing its own dedicated RAM, allocation of CPU power, hard disk space - in fact, everything you would physically need to create a server.
Finally, you install on each virtual machine the operating system that you desire, Linux or Windows and then you have virtual dedicated server.
Each virtual server on the host server can run its own operating system, it is not limited in anyway by OS already being run by other virtual dedicated servers on the same physical host server.
A virtual dedicated server enables you to enjoy all the benefits of a dedicated server while reducing some of the negatives of owning a dedicated server, e.g. you share the expense of acquiring the server hardware and network connections and to eliminate the difficulty and cost of maintaining them.
The virtual server is referred to as a dedicated server in the phrase VDS because although several VDS customers share the same hardware node, or physical host computer, they do not have access to each others hardware resources (RAM, CPU, HD). In other words the VDS has its own OS, dedicated application software and complete directory structure. You can restart the virtual dedicated server without it affecting any other VDS machines which share the same physical host server.
See our article on the benefits of a Virtual Dedicated Server
See also our article on when is a VDS better than a dedicated server
