KVM (Kernel-based Virtual Machine) is a full virtualization solution for Linux on x86 hardware containing virtualization extensions Intel VT or AMD-V. How do I install KVM under CentOS or Red Hat Enterprise Linux version 5.5?

The Linux kernel 2.6.20 and above included KVM. RHEL 5.5 (and upcoming RHEL 6) supports KVM out of box and it has also been ported to FreeBSD as a loadable kernel module. However, this tutorial is tested on both CentOS and RHEL 5.5 only running 64 bit Intel Xeon CPU (with Intel VT) and 64 bit kernels with SELinux running in enforcing mode.
Why KVM?

XEN allows several guest operating systems to execute on the same computer hardware and it is also included with RHEL 5.5. But, why use KVM over XEN? KVM is part of the official Linux kernel and fully supported by both Novell and Redhat. Xen boots from GRUB and loads a modified host operating system such as RHEL into the dom0 (host domain). KVM do not have concept of dom0 and domU. It uses /dev/kvm interface to setup the guest operating systems and provides required drivers. See the official wiki for more information.
Required Packages

You must install the following packages:

1. kmod-kvm : kvm kernel module(s)
2. kvm : Kernel-based Virtual Machine
3. kvm-qemu-img : Qemu disk p_w_picpath utility
4. kvm-tools : KVM debugging and diagnostics tools
5. python-virtinst : Python modules and utilities for installing virtual machines
6. virt-manager : Virtual Machine Manager (GUI app, to install and configure VMs)
7. virt-viewer: Virtual Machine Viewer (another lightweight app to view VM console and/or install VMs)
8. bridge-utils : Utilities for configuring the Linux Ethernet bridge (this is recommended for KVM networking)

KVM Package Group

RHEL comes with KVM software group which includes full virtualization support with KVM. You can list all packages in the group as follows:
# yum groupinfo KVM
Sample outputs:

Loaded plugins: rhnplugin, security
Setting up Group Process

Group: KVM
Description: Virtualization Support with KVM
Mandatory Packages:
celt051
etherboot-zroms
etherboot-zroms-kvm
kmod-kvm
kvm
kvm-qemu-img
qcairo
qffmpeg-libs
qpixman
qspice-libs
Default Packages:
Virtualization-en-US
libvirt
virt-manager
virt-viewer
Optional Packages:
celt051-devel
etherboot-pxes
etherboot-roms
etherboot-roms-kvm
gpxe-roms-qemu
iasl
kvm-tools
libcmpiutil
libvirt-cim
qcairo-devel
qffmpeg-devel
qpixman-devel
qspice
qspice-libs-devel

A Note About libvirt

libvirt is an open source API and management tool for managing platform virtualization. It is used to manage Linux KVM and Xen virtual machines through graphical interfaces such as Virtual Machine Manager and higher level tools such as oVirt. See the official website for more information.
A Note About QEMU

QEMU is a processor emulator that relies on dynamic binary translation to achieve a reasonable speed while being easy to port on new host CPU architectures. When used as a virtualizer, QEMU achieves near native performances by executing the guest code directly on the host CPU. QEMU supports virtualization when executing under the Xen hypervisor or using the KVM kernel module in Linux. When using KVM, QEMU can virtualize x86, server and embedded PowerPC, and S390 guests. See the official website for more information.
A Note About Virtio Drivers

Virtio is paravirtualized drivers for kvm/Linux. With this you can can run multiple virtual machines running unmodified Linux or Windows VMs. Each virtual machine has private virtualized hardware a network card, disk, graphics adapter, etc. According to Redhat:

Para-virtualized drivers enhance the performance of fully virtualized guests. With the para-virtualized drivers guest I/O latency decreases and throughput increases to near bare-metal levels. It is recommended to use the para-virtualized drivers for fully virtualized guests running I/O heavy tasks and applications.

Host Operating System

Your main operating system such as CentOS or RHEL is known as host operating system. KVM is a Linux kernel module that enables a modified QEMU program to use hardware virtualization. You only need to install KVM under host operating systems.
KVM Domains

It is nothing but a guest operating system running under host operating system. Each kvm domain must have a unique name and ID (assigned by system).
Guest Operating Systems

KVM supports various guest operating systems such as

1. MS-Windows 2008 / 2000 / 2003 Server
2. MS-Windows 7 / Vista / XP
3. FreeBSD
4. OpenBSD
5. Sun Solaris
6. Various Linux distributions.
7. NetBSD
8. MINIX
9. QNX
10. MS DOS
11. FreeDOS
12. Haiku
13. Amiga Research OS

Install KVM

Type the following command to install KVM under RHEL or CentOS:
# yum install kvm virt-viewer virt-manager libvirt libvirt-python python-virtinst
OR
# yum groupinstall KVM
Important Configuration And Log Files (Directories) Location

The following files are required to manage and debug KVM problems:

1. /etc/libvirt/ - Main configuration directory.
2. /etc/libvirt/qemu/ - Virtual machine configuration directory. All xml files regarding VMs are stored here. You can edit them manually or via virt-manager.
3. /etc/libvirt/qemu/networks/ - Networking for your KVM including default NAT. NAT is only recommended for small setup or desktops. I strongly suggest you use bridged based networking for performance.
4. /etc/libvirt/qemu/networks/default.xml - The default NAT configuration used by NAT device virbr0.
5. /var/log/libvirt/ - The default log file directory. All VM specific logs files are stored here.
6. /etc/libvirt/libvirtd.conf - Master libvirtd configuration file.
7. /etc/libvirt/qemu.conf - Master configuration file for the QEMU driver.

TCP/UDP Ports

By default libvirt does not opens any TCP or UDP ports. However, you can configure the same by editing the /etc/libvirt/libvirtd.conf file. Also, VNC is configured to listen on 127.0.0.1 by default. To make it listen on all public interfaces, edit /etc/libvirt/qemu.conf file.