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A virtual shredder is a computer program designed to destroy a file completely so that it is no longer recoverable. This is done by deleting and inserting random bits of data into the structure of the file, corrupting it entirely, and then overwriting the storage space where the file was located with random bits of data; with no clear way for a program to know which have been deleted and which bits have been inserted, there is a very low likelihood that the file can be read again in its entirety.
A virtual shredder ensures that a file is no longer recoverable, or at least no longer readable, when recovery is attempted using various file recovery methods. Most operating systems, notably Windows, do not actually delete a file when the delete operation is invoked because it can take a long time and requires more computing resources to do this. Instead, the operating system simply makes the file invisible to the file system and then marks the location of the file as free so that new files can be stored there, effectively overwriting the deleted file, erasing it forever. But if the location of the file has not been overwritten with another file, the file still actually resides there and it can be recovered with a specialized recovery program. This can be both good and bad -- good if the deletion was accidental and the user actually wants to recover an important file, but bad in terms of security because if it was deleted to prevent it from falling into the wrong hands, then this poses a great security risk since the file can still be recovered.
There are many ways to shred a file, and there are various standards that have been created specifically for this, such as the DoD 5220.22-M, Schneier and Gutmann data sanitization methods. These data sanitization methods are more commonly used for disk wiping, which aims to ensure that all of the space in a drive is written with 1s, 0s and random bits iteratively so that whatever was stored there is now gone. These methods can also be done on single files. Other virtual shredders also overwrite the actual data that make up the file with 1s, 0s and random bits to corrupt the file but do not overwrite the location, and some do both.