Well, there are a couple things - For one, the hypervisor presents different "hardware" than you would get in a standard HP or Dell box. And often the hypervisor has a driver package to install, to facilitate communication between the OS and hypervisor - this is used mostly to manage memory overcommit with things like a memory bubble.

As the hypervisor gets low on RAM, it tells its driver in the VM OS to use more RAM, which steals some away from that system. Then the hypervisor swaps that RAM or puts it out of play in another way, and gets to reclaim the underlying physical RAM. At least, this is the VMWare way of doing it, not too sure about MS or Citrix or RH or others.