Containers are an abstraction that exist using cgroups and namespaces for isolation. They use the hosts' kernel, it's not virtualized. Containers are only limited by the capabilities of namespaces and cgroups, unlike vms.

You might be dismissing microservices too quickly. They do have overhead but so does any level of abstract; the benefit of them though is clear separation of responsibilities between services and residency(Swarms, clusters, etc). Both can be achieved with Vms but VMs weren't built with these goals in mind