Docker is a light-weight application engine that deploys VM-like containers that share system level resources to allow easy deploy and multi-tenancy.
How is it different than Virtual Machine
In Virtualization, we can host multiple guest operating systems on the host machine.
Containerization is virtualization at the operating system level. Containers run on the same OS. It has much faster startup times than virtualization. Containerization takes seconds whereas virtualization usually takes minutes to start up.
Is it replacing Virtualization
No, It is an evolution. You still need a virtual machine to use Docker if you are using a Windows operating system. You need to install Linux OS on VM and install Docker on it. So you can host multiple containers on the guest OS.
Image source: Google images.