An Operating System is the software which interacts with the hardware of a PC and is the intermediary between applications and the hardware, which includes peripheral devices such as a printer, a mouse or a keyboard. When you run software, it transmits requests to the OS through an API (Application Program Interface) and the interaction is done via a command line or a Graphical User Interface (GUI). Just like a personal computer, web hosting servers also feature an Operating System that functions as a host for any software installed on them, including script applications or server-side software such as a flash server, a VOIP server, and many others. A virtual machine can be generated on a physical one, so you'll be able to install a guest OS on it and have a different system environment in contrast with the physical server host OS.