Virtualization is a general and ambiguous term that typically means to run multiple instances of something inside something that was intended to only run a single instance.
When most people talk about virtualization, they are usually referring to server virtualization. With server virtualization, you can run multiple operating systems inside a single physical server. For example, with a server virtualization product you could run, say, 5 Windows Server and 5 Linux servers on one physical server - with all servers functioning as if they are on their own hardware. In another example, you could run 1 Linux Workstation and 1 Windows Workstation on your office PC, each in their own environment, by using a server virtualization product.
Figure 1: Image Source: VMware.com