Virtualization originated from mainframe technology in the 1960s where mainframe computers were split into multiple virtual machines to run tasks independently. In the 1990s and 2000s, companies ran one application per physical server leading to inefficient utilization and high costs. Virtualization software allows multiple virtual machines to run on a single physical server, improving utilization and reducing costs while maintaining isolation between virtual machines. Virtualization provides benefits like reduced capital and operational expenses, high availability, rapid provisioning, and server consolidation.