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Server Virtualization allows multiple operating systems to run on a single physical server as virtual machines, maximizing server utilization and reducing hardware costs. In the context of Windows Server Update Services, it specifically refers to the ability to manage and distribute updates to these virtualized environments, ensuring all virtual machines are up-to-date and secure. This aligns with the broader categories of Software and Software Deployment, as it involves managing software on distributed systems and facilitating efficient deployment of updates.