The Great Virtualisation Secret

As you can see from diagram 1, by removing third party virtualisation software, you are effectively removing the middle man and there will be performance gains from a reduction in memory and processor overhead, however NEITHER of the above diagrams show paravirtulisation at work.

The Real Paravirtualisation

According to Wikipedia's Paravirtualisation page,

Paravirtualization may allow the virtual machine monitor (VMM) to be simpler or virtual machines that run on it to achieve performance closer to non-virtualized hardware. However, operating systems must be explicitly ported to run on top of a paravirtualized VMM. Owners of proprietary operating systems may decline to allow paravirtualization for strategic purposes.

The free dictionary puts it more simply:-

A virtual machine technique that requires the guest operating system to be modified in order to use it. Virtual machine monitors such as Xen and Hyper-V use this method. See Xen and Hyper-V.

In other words, true paravirtualisation is when:-

Virtualisation technology is built into the operating system and the virtual guest operating systems are aware that they are virtualised.