VM = Virtual Machine. Cloud = just about whatever people want it to these days. But in general it refers to a virtual environment. And on this thread it refers to Microsoft's cloud computing solution, Windows Azure. I have no links handy to point you to a diagram. But check out Scott Guthrie on meetwindowsazure.com that I mentioned before to see what Azure can do currently. Maybe someone else here can point you to a couple of good simple diagrams.