I'm not sure how best to describe this (as you can clearly tell from the title) so I'll give you an example:
I have a multisite Drupal installation. Each of the sites' sitemap.xml files are located on the server at /sites/example.com/files though with a browser (and to search engines) it is accessible at example.com/sitemap.xml
I was wondering how this was achieved? Is this called Virtual Directory?
Thank you
They are VirtualHost , if you install a multi site Drupal, you must Apache (or other web server) with different virtual hosts.
This virtual hosts resides in different directory and respond to different domain names! The trick is done by your webserver.
For drupal check: http://drupal.org/node/43816