Virtualization improves resource allocation in data centers by allowing multiple virtual machines (VMs) to run on a single physical server. This technology enables more efficient utilization of hardware resources by dynamically allocating CPU, memory, and storage to different workloads based on demand. Virtualization reduces hardware costs, minimizes physical space requirements, and enhances scalability. Additionally, it simplifies management and disaster recovery by enabling quick backups and migrations of VMs, making data centers more flexible in responding to changing business needs.