The virtual machine usually stores its virtual hard disk as a normal file on the host operating system's filesystem.
Think of a filesystem like a warehouse. The warehouse contains a large number of boxes (files) and a manifest that lists all of the boxes (the file table). When you delete a file, it doesn't actually destroy the data, it just deletes the entry from the manifest. When the next box comes into the warehouse, the manifest is checked, and the file is put into a free location. If that location already has a box in it, that old box is thrown out. As such, if you can scan through the warehouse instead of the manifest, you could check for boxes that aren't on the manifest, allowing you to extract contents of the boxes even though you "deleted" them.
So, if you delete the virtual machine's virtual disk file, the data will still remain on the disk. Since the virtual disk file is structured in terms of its own headers and the internal filesystem, it shouldn't be difficult to find and extract file data from within the virtual machine's filesystem. Formatting often doesn't solve this problem, as it just overwrites the file table with an empty one - the data is still there.
There are two ways to properly destroy files:
- Overwrite the disk sectors that contain the data with zeros.
- Encrypt the file data at runtime, then destroy the key when you want to delete the file.
The first option takes longer when you want to destroy the data, and puts more stress on the disk, as you have to overwrite every sector. The second option provides fast secure deletion, and increased protection during day-to-day use, but has a performance hit on the CPU. In fact, SSDs use the second option to reduce write-wear on the flash devices during a re-format - they store a master key, encrypt everything on the drive with it, then destroy and re-generate the key when given a re-format command.
So, if you're looking to destroy data securely, either perform a proper low-level wipe using
shred, or encrypt the disk using TrueCrypt and throw away the key when you want to get rid of the drive.