The Virtual DOM is a JavaScript representation of the actual DOM (Document Object Model). It's a programming concept where a "virtual" representation of the UI is kept in memory and synced with the "real" DOM.

How it works:

1. When state changes occur, React creates a new virtual DOM tree
2. React compares (diffs) the new virtual DOM tree with the previous virtual DOM tree
3. React calculates the minimum changes needed to update the real DOM
4. React applies only these necessary changes to the real DOM

This process is called reconciliation and makes React applications faster because manipulating the virtual DOM is much faster than manipulating the real DOM.