What is "virtual memory"?

This is sort of a noob question, but what exactly is "virtual memory" how does it work, and how is it different than the physical memory or RAM modules?
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More about what virtual memory
  1. Virtual Memeory is a page file that acts as RAM when your actual RAM density level (GB) isn't enough to handle all processes. For example, if you have three apps running, each requiring 1 GB, on a 2 GB system, you'd encounter the "Virtual Memory Low" warning message.

    VM works in the same fashion that RAM does, in that it provides a temp read/write cache to the apps needed, until enough of your open apps are closed to stop the use of VM.

    VM is different from RAM in that you don't physically install it. Rather, this is handled by the OS.
  2. To complement T_T, virtual memory is a portion of the hard drive used as extension of system memory. Since it is from the hard drive the read/write speed is low compared to actual RAM, and slows computer performance. You might notice the hard drive been constantly accessed.
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