Basically, there is 2 type of VPS whether it is a VM, virtual machine or a VPS, they are virtualized. But if you are examing carefully, they could be different. The VPS is either virtualized by OpenVZ or the commercial licensed Virtuozzo, or Hypervisor like KVM. OpenVZ and Virtuozzo are the same types of virtualization. They are known as OS level virtualization while Hypervisor like KVM is a hardware level virtualization. In terms of usage, they are little differences but there are some restriction on an OS level virtualized environment as well as a con in like KVM full virtualization.
Let us begin, the OpenVZ virtualization is like sharing CPU, memory and disk space dynamically. Although you are still catered to the resources you have purchased. Another word, you might use more if the server allowed but on other hands, you can be slower if your server has a lot of guest machines. Many circumstances, an OS or a control panel files are shared using the template system. This is an advantage to the hoster, as this has greatly reduced the disk space used. And it has helped to speed up the deployment process if they are universal. You are not likely to customize it
OpenVZ uses host kernel. It’s not possible to install applications require kernel existence like Anti-Virus or Backup agent etc. However, the guest machines create instructions and make a call to the hardware directly, thus the overhead is lower and it is faster. Kernel updates might be an issue to address OS vulnerability if you do not use 3rd party solution like Kenerlcare on the host server. To take effect the changes, a reboot is required.
I prefer Hypervisor like KVM for these reasons; In a KVM guest OS is independent so the kernel. You can have a mix of OS guest machines not limited to the kind of OS installed on the host server. You can install any application, there is no such restriction like an OpenVZ VPS. No doubt KVM Full virtualization has higher overhead as their hardware is emulated and virtualization, however, these years there are improvements like ballooning and paravirtualization has improved a KVM guest machines.
If you are looking for better isolation and security. A hypervisor will do better in this area. This is one of the major reason why Vastspace has chosen KVM for our VPS plans.