From the
Euro-VO site:
A Virtual Observatory (VO) is a collection of interoperating data archives and software tools which utilize the internet to form a scientific research environment in which astronomical research programs can be conducted. In much the same way as a real observatory consists of telescopes, each with a collection of unique astronomical instruments, the VO consists of a collection of data centres each with unique collections of astronomical data, software systems and processing capabilities. The need for the development of a VO is driven by two key factors. Firstly, there is an explosion in the size of astronomical data sets delivered by new large facilities like the ESO VLT, the VLT Survey Telescope (VST), and VISTA. The processing and storage capabilities necessary for astronomers to analyse and explore these data sets will greatly exceed the capabilities of the types of desktop systems astronomers currently have available to them. Secondly, there is a great scientific gold mine going unexplored and underexploited because large data sets in astronomy are unconnected. If large surveys and catalogues could be joined into a uniform and interoperating "digital universe", entire new areas of astronomical research would become feasible. A more thorough discussion of the need for VOs and the forces driving the evolution of scientific computing can be found in the AVO paper on IT and Computation in the 21st century.