Android virtual device is a virtual mobile device (emulator) that runs on your computer. The emulator lets you test an Android application without using a physical device. Although, it's not the best testing approach, as it just mimics the device, but at least you have something to test in case you cannot afford an actual Android device.
When the emulator is running, you can interact with the emulated mobile device just as you would in an actual mobile device, except that you use your mouse pointer to touch the touchscreen and you are able to use some keyboard keys to invoke certain keys on the device.
The Android emulator mimics all of the hardware and software features of a typical mobile device, except that it cannot place actual phone calls. It provides a variety of navigation and control keys, which you can "tap" using your mouse or keyboard to generate events for your application. It also provides a screen in which your application is displayed...