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In terms of virtualization there really is no "type 1 vs type 2" hypervisor. Both require an operating system to perform network, storage, and virtualization operations. The VMware "kernel" is itself an OS. You can run many gnu programs on it. It even ships with helpful userland tools and binaries. It runs a webserver and tomcat stack.
The fantasy of type 2 was concocted by VMware in order to not only differentiate its product from open alternatives, but disparage emerging and powerful open competitors like kvm and qemu.
Now that VMware is in its death throws, the type fallacy has been abandoned. VMware fanboys will still flog VMware as a solution to a problem broadcom no longer cares to engage.
VMware is dead. Has been for about a decade now.