If you had a host machine with 8 cores, and a virtual machine with 2 cores, the virtual machine will only possibly use 25% of the CPU resources of the host mach

If you had a host machine with 8 cores, and a virtual machine with 2 cores, the virtual machine will only possibly use 25% of the CPU resources of the host machine -- one vCPU cannot be schedule in parallel across more than one physical core. However it is advisable to minimize the vCPUs in VMs because it greatly enhances scheduling -- if a VM has 8 vCPUs allocated to it, with some hypervisors that lack advanced co-scheduled it won't be scheduled until 8 cores are available, and in some situations it will sit on 8 cores during its duration whether it is only using 1 or all. If you have a large number of smaller VMs, scheduling can greatly improves. This isn't true for all hypervisors and situations. You mileage may vary.