Ok, there are several programs i know of:
PowerISO
MagicISO
Magic Disc
Daemon Tools
Alcohol 120%
It is ver annoying but i have every one of them apart from Alcohol 120% installed on my computer because each one have at least one file extension that is unique to that program.
Now, using the example of the most common virtual CD?DVDs out ther is .iso so i will use this in this example.
Imagine the file Crysis.iso is a dvd on your computer, a real dvd but on your computer itself, you have the cd, all the files including the autorun are on there, for all intents and purposes if it was in real life you would be putting it in your DVD Drive and running it like normal.
But this isnt normal, the disc is IN your computer, on your computer, you cant get it into your DVD Drive unless you BURN it to a DVD. So you get a Virtual CD/DVD drive, its like having a real CD?DVD drive in your computer that you can put discs into, for us it can run .iso images so it is like we are putting our Crysis.iso disc into a Drive, but on the computer, using a virtual cd/dvd in a virtual cd/dvd drive is called MOUNTING and we normally call the 'Virtual discs' images, as they are images of a real cd/dvd.
I will not go into detail about how they actually work, software and drivers wise, but if you want a basic jist of it in lamen's terms, there it is!