KVM (Kernel-based Virtual Machine) is a hardware-level virtualization technology. This means that the main OS on the server simulates hardware for the other OS running on top of it. It also acts as a hypervisor, managing and distributing the resources, disk and network IO / CPU time, on the server.

KVM does not support burst resources - these are all either shared or dedicated. This means that resources, such as RAM or diskspace, are much more difficult to overcommit without putting all of the user's data at risk. The disadvantage with KVM virtualization is that, in case the resource limits are hit, the VPS must swap, which would lead to a major performance penalty, or it's processes must be killed. Unlike OpenVZ, KVM VPS cannot 'borrow' unused resources from other VPS on the node, as it is completely isolated.

Because KVM simulates hardware, you have the possibility of executing any kernel you'd like on it ( within limits ). This means that KVM isn't limited to only Linux, which is installed on the node. KVM can also run x86 OS such as BSD and Microsoft Windows. Having the kernel completely independent means that the VPS can make changes to the kernel or load it's own modules.