Encapsulation

All the data in the virtual machine are stored in terms of file-based format. They are typically stored in their VM directories.

In the following image, we have three VM's: Base, Ubuntu 16, and Windows 10, and each of them has a separate directory:

If we go inside one of these directories, you will see virtual disk files as shown in the following image:

Since virtual disks are stored as files inside directories, it is very easy to take backup of these and store it in safe storage locations. Along with this, sharing of these files is also easy.