An Operating System is the software which communicates with the hardware of a computer system and works as the intermediary between apps and the hardware, including peripherals such as a printer, a mouse or a keyboard. When you run software, it transmits requests to the OS using an API (Application Program Interface) and the communication is done via a command line or a Graphical User Interface (GUI). A lot like a personal computer, web hosting servers also have an Operating System which serves as a host for all of the software installed on them, including script apps or server-side software such as a flash server, a VOIP server, etcetera. A virtual machine can be set up on a physical one, so you could install a guest OS on it and have a different system environment compared to the physical server host OS.