Processor modes refer to the various ways that the processor creates an operating environment for itself. Specifically, the processor mode controls how the processor sees and manages the system memory and the tasks that use it. There are main three different modes of operation.

The 8088 chip could only address 1 MB of system memory, and the original versions of Disk Operating System created to work on it were designed with this in mind. This is called real mode. When a processor is running in real mode, it has the advantage of speed, but it otherwise accesses memory with the same restrictions of the original 8088, a limit of 1 MB of addressable memory, and slow memory access that doesn't take advantage of the full 32 - bit processing of modern processors. All processors have this real mode available, and in fact the computer normally starts up in real mode.

Starting with the 80286 chip a new processor mode was introduced called protected mode. This is a much more powerful mode of operation than real mode, and is used in all modern multitasking operating systems. This mode provides full access to all of the system's memory. There is no 1 MB limit in protected mode. Also the ability to multitask, meaning having the operating system manage the execution of multiple programs simultaneously. Plus support for virtual memory, which allows the system to use the hard disk to emulate additional system memory when needed. And faster (32 - bit) access to memory, and faster 32 - bit drivers to do Input Output transfers. The name of this mode comes from its primary use, which is by multitasking operating systems. Each program that is running has its own assigned memory locations, which are protected from conflict with other programs. If a program tries to use a memory address that it isn't allowed to, a protection fault is generated.

The third mode of processor operation is actually an additional capability, an enhancement, of protected mode. Protected mode is normally used to run graphical multitasking operating systems such as the various flavors of Windows. There is often a desire to be able to run Dos programs under Windows, but Dos programs need to be run in real mode, not protected mode. Virtual real mode was created to solve this problem. In essence, it emulates real mode from within protected mode, allowing Dos programs to run. A protected mode operating system such as Windows can in fact create multiple virtual real mode machines, each of which appear to the software running them as if they are the only software running on the machine. Each virtual machine gets its own 1 MB address space, an image of the real hardware Basic Input Output System routines, everything. Virtual real mode is what is used when a Dos box is used or a Dos game is run in Windows. When a Dos application is started, Windows creates a virtual Dos machine for it to run under. Virtual real mode was introduced starting with the 386 family of processors.

The third mode of processor operation is actually an additional capability, an enhancement, of protected mode. Protected mode is normally used to run graphical multitasking operating systems such as the various flavors of Windows. There is often a desire to be able to run DOS programs under Windows, but DOS programs need to be run in real mode, not protected mode.

Virtual real mode was created to solve this problem. In essence, it emulates real mode from within protected mode, allowing DOS programs to run. A protected mode operating system such as Windows can in fact create multiple virtual real mode machines, each of which appear to the software running them as if they are the only software running on the machine. Each virtual machine gets its own 1 MB address space, an image of the real hardware BIOS routines, everything.

Virtual real mode is what is used when you use a DOS box or run a DOS game in Windows 95. When you start a DOS application, Windows 95 creates a virtual DOS machine for it to run under. Virtual real mode was introduced starting with the 386 family of processors.