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A virtual private server (VPS, also referred to as Virtual Dedicated Server or VDS) is a method of splitting a server. Each virtual server can run its own full-fledged operating system, and each server can be independently rebooted.

The practice of partitioning a single server so that it appears as multiple servers has long been common practice in mainframe computers, but has seen a resurgence lately with the development of virtualization software and technologies for other architectures.

The physical server typically 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; typically in a manner in which the guest is not aware of any other physical resources save for those allocated to it by the hypervisor.

The Guest system may be fully virtualized, para-virtualized, or a hybrid of the two. In 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.

In a para-virtualized 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. This result in near-native performance since the guest sees the same hardware as the host and can thus communicate with it natively. UNIX-like systems, such as Linux, some variants of BSD, Plan9, and OpenSolaris are currently known to support this method of virtualization. However, installing operating systems as para-virtualized guests tends to require more knowledge about the operating system in order to have it use special hypervisor-aware kernels and devices.

Some examples of para-virtualization-capable hypervisors are , Virtuozzo, Vserver, and OpenVZ (which is the open source and development version of Parallels Virtuozzo Containers).

Hybrid or partial para-virtualization is full virtualization, but in which the guest uses para-virtualized 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 para-virtualization.

Virtual private servers are also sometimes employed as honeypots, allowing a machine to deliberately run software with known security flaws without endangering the rest of the server. Multiple honeypots can be quickly set up via VPSs in this fashion.

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