Virtualization optimizes server utilization by allowing multiple virtual machines (VMs) to run on a single physical server. Each VM operates with its own operating system and applications, enabling better resource management and maximizing hardware efficiency. With virtualization, organizations can distribute workloads more evenly, reduce the need for additional physical servers, and lower energy costs. The technology also enhances scalability, as new VMs can be created quickly, facilitating dynamic resource allocation that adjusts to changing demands. Overall, virtualization supports cost-effectiveness and improves the performance of IT infrastructures.