The Machine Hierarchy
A computer system consists of four computers or data processing machines organized into layers:
Except for the bottom layer, each layer is a program or collection of programs running on the layer below.
A computer made out of software is called a virtual machine. The Application, Programming, and Operating System layers are virtual machines.
A computer made out of hardware (chips mounted on circuit boards) is called a physical machine. The hardware layer is a physical machine.
The distinction between physical and virtual machines is not very important because physical machines can simulate virtual machines and vice versa.