I've only come across it briefly, but my understanding is that it allows one to create a virtual machine that is separate from the actual machine you're running on. The primary motivation for this being that any buggy software, viruses, etc. can only trash this virtual machine and your actual filesystem, software and hardware are safe.
There's a wealth of information on the project homepage
, and particularly on their page entitled What it's good for
. As well as many other pages on the topic. Google is your friend...