VirtIO provides Memory Ballooning: the host system can reclaim memory from virtual machines (VM) by telling them to give back part of their memory to the host system. This is achieved by inflating the memory balloon inside the VM, which reduced the memory available to other tasks inside the VM. Which memory pages are given back is the decision of the guest operating system (OS): It just tells the host OS which pages it does no longer need and will no longer access. The host OS then un-maps those pages from the guests and marks them as unavailable for the guest VM. The host system can then use them for other tasks like starting even more VMs or other processes.
If later on the VM need more free memory itself, the host can later on return pages to the guest and shrink the holes. This allows to dynamically adjust the memory available to each VM even while the VMs keep running.