A virtual machine is a type of software that simulates all aspects of a physical computer system including an operating system, memory, storage and (virtual) network connections.
Since virtual machines are self-contained, they are often used to conduct risky experiments without the danger of spreading risk outside of the VM.
What is an example of a Virtual Machine?
Ethereum has its own virtual machine upon which all nodes must be run. This means that in order to run an Ethereum node you must connect to a virtualized version of the same computer system. Hence why Ethereum is sometimes referred to as a “world computer.”
This also makes Ethereum less prone to DDOS (Distributed-denial-of-service) attacks since the nodes exist within their own unique environment.
Does Bitcoin use a Virtual Machine?
Bitcoin does not use a virtual machine at the core protocol. However, individual users can participate and run their own nodes on their own virtual machines should they choose to.