If checked, the instance is launched with nested virtualization enabled, allowing it to run a hypervisor (KVM or Hyper-V) and start nested virtual machines.

Nested virtualization is only supported on specific instance families (for example C8i, M8i and R8i) and requires an AMI with a compatible L1 hypervisor. Leave it unchecked for instance types or AMIs that do not support it. Enabling nested virtualization automatically disables Virtual Secure Mode (VSM).

See Use nested virtualization to run hypervisors in Amazon EC2 instances for details.