Virtual Memory is not actually memory. It is storage space on your hard disk used temporarilly for the storage of active programs you are not actively working on that used to be in RAM. is the process of extending RAM by using hard disk storage space. Virtual Memory is used to allow a computer to do more with less resources. Computers run all programs from memory (RAM). When the ammount of available RAM is insufficient, some of the contents of RAM are written to the hard disk in chunks called pages.
Programmers once believed that since humans can only do one thing at a time, they can only use one program at a time and thus a computer can move a program running in RAM that the user is not actively using to the disk temporarilly. When the user switches back to the application, it is moved back to RAM so it can be executed and some other application is moved to disk. This process of swapping out pages of memory is known as paging. To make virtual memory work efficiently, a swap file is needed to set aside hard disk space for storage. This is space that cannot be used for anything else and must be at least as large as the ammount of RAM you have on the system to work properly.
The reality is that today's users often are listening to music while they work on a web page and are rendering 3D graphics. This is why many computers run so slowly and why you can get big speed improvements just by buying RAM for an underpowered system. Since the disk is hundreds of times slower than the RAM, the system speeds up considerably when you have more RAM and use the virtual memory on disk less.