To begin with, ISP is short for 'Internet Service Provider', and
is a company - like Tiscali or Aol - who provide access to the Internet.
A backbone ISP, like BT, will pay for a vast amount of: equipment,
employees, phoneline support and other typical business expenses.
A virtual ISP differs, because, they do have any such expenses:
their ISP service is just a front for another. For example, a new
ISP called 'meganet' is created who begin an advertising drive to
attract new users. They haven't the funds to pay for the network
equipment or network employees, so they ask BT to provide this aspect
of the business for them. It's somewhat like a supermarket who pay
third party companies to bake their bread but package it as the
supermarket's "own" brand.