An Operating System is the software that communicates with the hardware of a computer system and functions as the intermediary between applications and the hardware, which includes peripherals such as a printer, a mouse or a keyboard. When you run software, it transfers requests to the OS using an API (Application Program Interface) and the communication is done via a command line or a Graphical User Interface (GUI). A lot like a personal computer, hosting servers also have an Operating System which functions as a host for any software installed on them, which includes script applications or server-side software such as a flash server, a VOIP server, etcetera. A virtual machine can be created on a physical one, so you will be able to install a guest OS on it and have a different system environment compared to the physical server host Operating System.