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The hypervisor is a key to enable virtualization. In its simpler form, the hypervisor is specialized firmware or software, or both, installed on single hardware that would allow you to host several virtual machines. It allows physical hardware to be shared across several virtual machines. A computer on which hypervisor runs one or more virtual machines is called a host machine. The virtual machine is called a guest machine. Basically, the hypervisor allows the physical host machine to run various guest machines. This helps in achieving maximum benefits from computing resources such as memory, network bandwidth, and CPU cycles.
There are two main types of hypervisor in cloud computing.
A type I hypervisor operates directly on the host's hardware to monitor hardware and guest virtual machines, and it's referred to as the bare metal. Usually, they don't require the installation of software ahead of time. Instead, you can install right onto the hardware. This type of hypervisor tends to be powerful and requires a great deal of expertise to function it well. In addition, Type I hypervisor are more complex and have certain hardware requirements to run adequately. Due to this, it is mostly chosen by IT operations and data center computing.
Examples of type I hypervisors include Xen, Oracle VM Server for SPARC, Oracle VM Server for x86, Microsoft Hyper-V and VMware’s ESX/ESXi.
It's also called a hosted hypervisor because it is usually installed onto an existing operating system. They are not much capable to run more complex virtual tasks. People use it for basic development, testing, and emulation. If there is any security flaw found inside the host OS, it can potentially compromise all of virtual machines running. This is why type II hypervisors cannot be used for data center computing. They are designed for end-user systems where security is a lesser concern. For instance, developers could use type II Hypervisor to launch virtual machines in order to test software product before their release.
A few examples are Virtual box, VMware workstation, fusion.
When you achieve virtualization, it brings a consolidation of multiple resources. This tends to reduce costs and improves manageability. In addition to it, a hypervisor can manage increased workloads. In a situation when a specific hardware node gets overheated, you can easily switch those virtual machines onto some other physical nodes. Virtualization also delivers other benefits of security, debugging and support.