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A virtual hard disk (VHD) is a type of disk drive that has similar functionalities as a typical hard drive but is accessed, managed and installed on a virtual machine infrastructure.
VHD is considered a file format and application, and is designed primarily to be used by virtual machines. It often contains the same hard drive sectors found on a physical hard drive, such as disk partitions and a file system.
A virtual hard disk operates like a conventional physical hard disk, having all the capabilities to create disk sectors, files and folders, run an operating system and install and execute other applications. A virtual hard drive is created on a physical hard drive, but has a logical distribution of its own. In turn, it can host many different virtual hard drives simultaneously, depending on its size. Each of the created virtual hard disk is created as a tightly coupled drive and doesn’t overwrite or interfere with the operation of other VHDs.
Virtual hard disks can have a fixed or flexible disk size, which is managed and controlled by the virtualization manager or the parent operating system. Virtual hard disks were first conceived by Connectix Inc., which was purchased by Microsoft Co. to be used in their virtual PC as a virtual machine application for the Windows OS.