VMware is, as you said a "Virtual" Machine. Essentially, it's an operating system you can run within your OS. It works great as a sandbox, or if you have need for another operating system and don't want to install a partition on your physical hard drive. It uses a portion of your hardware (that you can manually adjust and allot) for it's resources. Some people use them for bots (like the RID bots that actually control your mouse) that way it doesn't tie down their system.