The virtual feature allow you to create a fake device that other programs can detect it as a camera, so for example any video effect applied to the camera, screen, or video from Webcamoid, can be seen in those other programs.
The virtual camera feature may not be available in all operating systems, and may not work with all programs. For example, this feature is not yet available in Android due to the operating system restrictions, in Windows some programs way ignore the virtual devices due to API incompatibilities.

For creating a virtual camera go to the Main menu/Video/Outputs Then press Add output.

Now you can set the virtual camera name.
The virtual camera comes with some predefined common formats, but you can also modify them on your convenience with Add fotrmat.

Here you can set the pixel format, resolution, and frame rate.

The virtual camera is added to the list. You can disable the virtual camera output by selecting the No Output option.

In Windows and GNU/Linux you can set a default frame,in case that the virtual camera is disabled or the playback is stopped, press the Set output picture option to change it, in Windows only BMP, JPG, and PNG formats are supported, in GNU/linux only BMP is supported.
In GNU/Linux, this feature is supported with akvcam driver only, v4l2loopbasck does not support this feature.