In a nutshell
A virtual machine is a whole computer faked in software, so one physical machine can run several complete operating systems at once. A hypervisor does the faking, giving each guest its own pretend hardware and keeping them walled off from one another. A Type 1 hypervisor runs directly on the bare hardware; a Type 2 one runs as an app on top of an ordinary host OS — handier on a laptop, slightly slower.