What is a VST Instrument, and how do they work?

The VST (Virtual Studio Technology) system was developed by Steinberg to enable a complete studio to be created in software. Even in its earliest incarnation, it allowed third-party developers to produce real-time effect modules that could 'plug in' to the host application. However, when Steinberg introduced the second version of the VST plug-in standard it also became possible to send MIDI data to and from such effects. This enabled developers to add more features, such as MIDI control of effect parameters and locking of effect settings to tempo. The inevitable result of this advance in the protocol was that this MIDI information was also used to run synth engines, rather than just effects processors. It is these synths, masquerading as effects plug-ins in order to fit directly into the sequencing environment, that are called VST Instruments.