Created by Dan Bornstein former employer of Google. This is a VM framework similar to Java VM framework for Java devices, but more optimized for Android battery devices.
Dalvik reads .dex files. Android SDK provides dx tool for creating .dex files from .class files.
Dalvik also has just-in-time (JIT) compiler. It was added to the Dalvik VM starting from Froyo Android release. This has great performance impact.
Every app that runs on Android runs in Dalvik VM. Every app runs in its own Linux process and has its user id. This is often referred as Android Dalvik sandbox.
Android Dalvik VM sandbox is how Android applications are isolated from other Android apps. Further security feature in Android is: every app needs to declare permissions required in order to run.
The permissions of an application must be declared using