What is virtual hard drive?

Virtual hard disk (VHD) is a disk image file format for storing the complete contents of a hard drive. The disk image, sometimes called a virtual machine, replicates an existing hard drive and includes all data and structural elements. It can be stored anywhere the physical host can access.

There are two main types of virtual hard disks: fixed-size and dynamically expanding. Both types have a maximum size value that specifies how large the disk will appear to virtual machines. However, fixed-size VHDs will automatically take up the specified amount of physical disk space on the host computer's file system, whereas dynamically expanding disks will allocate space only as needed.