Its the base for the inflation. Virtual supply includes the HBD supply as well converted to HIVE at the feed price. For example now the regular supply is 463M while the virtual is 555M.

If you multiple the Hive inflation rate, 6% atm, with the virtual supply you get higher inflation. Swiching to regular willl be lower. This can be done via HardFork of the core code, and it should be part of the changes in the next HF.