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Virtual Hosting is a method where more than one domain or subdomain name can be hosted on the same Liferay portal binaries.
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In the ASP model, each "Instance" or "Company" maintains data in the database that is completely segregated from other data in the database. This is usually handled via an entry in each database table known as a companyId and must be assigned a specific virtual host address. Hence, if there is to be complete isolation of different sets of data, this is the best mechanism for virtual hosting. However, due to the fact that the data is effectively namespaced, a completely separate set of users/admins are needed to manage each unique Company. Other data (e.g., Journal CMS content) can be shared across the different Companies and, hence, must be completely reproduced.
For "Communities," these are common areas that users within a given Company can access if given the rights. Creating Communities is a matter of clicking a button and can be configured to have a virtual host address if so desired (but not necessary, unlike the ASP model). User management is much simpler in this case since users can be participating in a number of different communities. Also, Instance-scoped or Company-scoped data can be accessed from other communities as well. The main con in this environment is the lack of isolation in the data.