From the SolidWorks Help:

Virtual components are saved internally in the assembly file instead of in separate part or subassembly files.

Virtual components are especially useful in top-down design. During the conceptual design process, when you frequently experiment with and make changes to the assembly structure and components, using virtual components has several advantages over the bottom-up design method:

• You can rename these virtual components in the FeatureManager design tree, avoiding the need to open, save as a copy, and use the Replace Components command.
• You can make one instance of a virtual component independent of other instances in a single step.
• The folder where you store the assembly is not cluttered with unused part and assembly files resulting from iterations of component designs.

By default, when you create components in the context of an assembly, the software saves them inside the assembly files as virtual components.

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