Also, when is the basic Vista an upgrade? From Windows XP, or do they mean from another Vista system?
And finally, how do you transfer the operating system from one computer to another?
A "virtual machine" in this case means you can run multiple operating systems side by side on the same computer.
For example I can run Linux, Windows 2000 and Windows XP all on the same computer. There is a company called VMWare that makes software to give you this capability. http://www.vmware.com/products/
Virtualization is one of the latest buzzwords in the IT crowd. What it really is, is a way of emulating another computer underneath the OS you are already running. I've used this at work quite a bit to simulate clusters of computers, and how they all network together. We're starting to roll out virtual machines in our dev/test environments and eventually to production as well.
With virtualization, you can have a computer running, say ESX server (vmware) which is basically a tuned linux kernel. This server then creates virtual computers that can boot up a few copies of windows (each running in their own little space, thinking that they are the only thing running on that hardware), a few copies of Linux, and a copy of BSD for good measure. The main benefit of running them like this (especially the windows servers), is that a serious crash, be it the OS or software will not affect any of the other servers running on that physical machine because they are completely separated from each other and in fact are not aware of the other 'virtual' machines that are running.
It's cool tech. Overblown a bit in some quarters, but amazingly powerful in others.