A virtual payment terminal is a Web-based version of a credit card swipe device that allows merchants to process orders made by mail, over the phone or online.
Virtual terminals facilitate payment for small businesses that might otherwise have difficulty accepting credit card payments. Once the seller has signed up for the virtual terminal service, they enter customer payment data for transactions in a form similar to the ones used for online retail, with fields for name, address, type and number of credit card, card verification value (CVV) and so on.
Virtual terminals are easier for the merchant because they don't require specialized hardware or even software. Because payment transactions go through the virtual payment provider's website, the third-party provider -- rather than the merchant -- is responsible for ensuring compliance with Payment Card Industry Data Security Standard (PCI DSS) requirements. The merchant doesn’t have to be concerned with PCI DSS requirements unless they store, process or transmit a primary account number (PAN) themselves.
See a video introduction to PayPal's Virtual Terminal: