This is a pretty good article explaining application virtualization here. I think all the virtualization terms can get rather confusing. I first got introduced to application virtualization through Altiris a few years ago. I thought it was a good platform for us IT folks that would commonly install and uninstall tools for testing on our own workstations. It basically creates a layer between the virtualized application and the OS. You could install the application within this wrapper and then the application would make requests to the OS through Altiris. You could then completely uninstall the app by clicking a button and all traces would be gone. The problem I encountered in the early form of the product was the lack of management and delivery tools to be used in a wide spread enterprise deployment.
I didn’t follow it much after I started using full OS virtualization for my test environments. However over the past couple of years companies have started to make application virtualization part of their product stacks.
Now VMware offers Thinclient and Microsoft the solution they brought from SoftGrid. In both cases instead of the requirement of installing the underlying application virtualizer all of it is packaged in a single executable. This allows the application to be delivered through network shares or other system management applications. With the VMware solution you can basically put the application on a “stick” and carry it around with you and in theory use it on any PC.
This isn’t to be confused with application streaming. Which is the traditional desktop virtualization brought to you by Microsoft and/or Citrix in the form of terminal server. This is your traditional OS streaming technology that relies on RDP/HDX/ICA. In general they require at least a constant 56Kbps connection from the client to the terminal server to deliver the application or desktop and most if not all of the processing is done at the server.
This is just something to remember when you think about desktop virtualization vs. application virtualization.