Can someone explain me the significance of Virtual issues, the difference between Virtual and Special issues? Also, under what conditions does a journal propose for a Virtual issue, does it have any impact on the Impact factor of the journal?
Virtual issues, which are also referred to as "collections" or by other names, are a set of papers that were already published in various issues of a journal and are centered around a single topic. This is usually done to highlight a certain topic or simply to help readers find papers on a topic. This is done on the editorial/website level and that is why it is "virtual" - usually no special content is created for this.
Special issues are issues in which the journal decides in advance about a certain topic, and invites submissions of papers on this topic. Often there is also an invited guest editor for the issue, who is an expert in the field. The final result could actually look similar to a virtual issue (a collection of papers on a single topic), but in a special issue these would be new papers submitted specifically for this issue. Sometimes there will also be some overview piece written by the editor.
Special issues might indeed affect the impact factor of the journal. For example, the journal Bioinformatics sometimes has a special issue in which the papers published are papers that were accepted to ISMB, a major bioinformatics conference. These papers probably get cited on average more than other papers in the journal, so it would increase the impact factor.
I suspect you might have this closed for being too broad, as each journal will have it's own specific meanings for these things. But, in my experience:
Virtual Issue: An issue of the journal that is, well, virtual. Meaning it's not going to be in the print edition. As Bitwise notes, this is often a collection of papers from other issues, and essentially a curated collection surrounding a topic, rather than new, standalone papers. See: http://www.journalofecology.org/view/0/virtualIssues.html
Special Issue: A special issue is also just that...special in some way. Usually it's organized around a particular theme, may or may not be printed, but is out of step with the regular focus of the journal. Note there are some journals where every issue is a "Special Issue on...". But for many, it's a rare, focused piece that took either targeted submissions or invited papers to cover a specific topic. I'd suggest, in contrast to virtual issues, that special issues are rarely collections of previously published articles.
Also, under what conditions does a journal propose for a Virtual issue, does it have any impact on the Impact factor of the journal?
Because someone at the editorial board wanted to do one? As for whether or not it has an impact on the IF of the journal, it will depend on the issue in question. A special issue made up of cutting edge expert reviews, or guidelines from a society, may have an extremely high citation rate, which would help the journal's IF.