Nested Virtualization is a term that refers to a nested virtualized environment i.e. running a virtual machine within a virtual machine.
Nested Virtualization is a technique to enable multiple virtual machines on a same host server. A host hypervisor runs over the physical host which is also known as level 0 hypervisor. The virtual machine which runs over the host hypervisor is knows as outer guest . The nested hypervisor which runs over the outer guest is also known as Level 1 hypervisor whereas the virtual machine running over nested hypervisor is known as inner or nested guest. Nested virtualization is not supported by all hypervisors and operating systems. Some of the hypervisors that support nested virtualization are Hyper-V, KVM guest hypervisors, VMware ESXi and Xen.