VMware vSphere virtualizes the entire IT infrastructure including servers, storage, and networks.

VMware vSphere aggregates these resources and presents a uniform set of elements in the virtual environment. With VMware vSphere, you can manage IT resources like a shared utility and dynamically provision resources to different business units and projects.

Virtual Datacenter Architecture shows the key elements in virtual datacenter.

Virtual Datacenter Architecture
The key pieces of the virtual datacenter architecture are represented with virtual machines (standalone, within clusters or within resource pools) connected together by one or more network. Each of the virtual machines are part of one or more datastore.

You can use vSphere to view, configure, and manage these key elements. These elements include:

Computing and memory resources called hosts, clusters, and resource pools

Storage resources called datastores

Networking resources called networks

Virtual machines

A host is the virtual representation of the computing and memory resources of a physical machine running ESX/ESXi. When one or more physical machines are grouped together to work and be managed as a whole, the aggregate computing and memory resources form a cluster. Machines can be dynamically added or removed from a cluster. Computing and memory resources from hosts and clusters can be finely partitioned into a hierarchy of resource pools.

Datastores are virtual representations of combinations of underlying physical storage resources in the datacenter. These physical storage resources can come from the following:

Local SCSI, SAS, or SATA disks of the server

Fibre Channel SAN disk arrays

iSCSI SAN disk arrays

Network Attached Storage (NAS) arrays

Networks in the virtual environment connect virtual machines to one another and to the physical network outside of the virtual datacenter.

Virtual machines are designated to a particular host, cluster or resource pool, and a datastore when they are created. After they are powered-on, virtual machines consume resources dynamically as the workload increases or give back resources dynamically as the workload decreases.

Provisioning of virtual machines is much faster and easier than physical machines. New virtual machines can be created in seconds. When a virtual machine is provisioned, the appropriate operating system and applications can be installed unaltered on the virtual machine to handle a particular workload just as though they were being installed on a physical machine. A virtual machine can even be provisioned with the operating system and applications already installed and configured.

Resources get provisioned to virtual machines based on the policies set by the system administrator who owns the resources. The policies can reserve a set of resources for a particular virtual machine to guarantee its performance. The policies can also prioritize and set a variable portion of the total resources to each virtual machine. A virtual machine is prevented from being powered-on and consuming resources if doing so violates the resource allocation policies. For more information on resource and power management, see the Resource Management Guide.