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Virtual memory or virtual memory addressing is a memory management technique, used by multitasking computer operating systems wherein non-contiguous memory is presented to a software (aka process) as contiguous memory. This contiguous memory is referred to as the virtual address space.
Virtual memory addressing is typically used in paged memory systems. This in turn is often combined with memory swapping (also known as anonymous memory paging), whereby memory pages stored in primary storage are written to secondary storage (often to a swap file or swap partition), thus freeing faster primary storage for other processes to use.
In technical terms, virtual memory allows software to run in a memory address space whose size and addressing are not necessarily tied to the computer's physical memory. To properly implement virtual memory the CPU (or a device attached to it) must provide a way for the operating system to map virtual memory to physical memory and for it to detect when an address is required that does not currently relate to main memory so that the needed data can be swapped in. While it would certainly be possible to provide virtual memory without the CPU's assistance it would essentially require emulating a CPU that did provide the needed features.
Windows example
Virtual memory has been a feature of Microsoft Windows since Windows 3.0 in 1990; it was done in an attempt to slash the system requirements for the operating system in response to the failures of Windows 1.0 and Windows 2.0 respectively. 386SPART.PAR or WIN386.SWP is a hidden file created by Windows 3.x for use as a virtual memory swap file. It is generally found in the root directory, but it may appear elsewhere (typically in the WINDOWS directory). Its size depends on how much virtual memory the system has set up under Control Panel - Enhanced under "Virtual Memory". If a user moves or deletes this file, Windows will BSoD the next time it is started with "The permanent swap file is corrupt" and will ask the user if he wants to delete the file (It asks this question whether or not the file exists).
Windows 95 uses a similar file and the controls for it are located under Control Panel - System - Performance tab - Virtual Memory. Windows automatically sets the page file to start 1.5x physical memory, and expand up to 3x physical memory if necessary. If a user runs memory intensive applications on a low physical memory system, it is preferable to manually set these sizes to a value higher than default.
Under NT-based versions of Windows (including Windows 2000 and Windows XP) the name is pagefile.sys. The default location of the page file is in the root directory of the partition where Windows is installed. Windows can be configured to use free space on any available drives for page files.