Virtual environments isolate project dependencies. Different projects can require different package versions; virtual environments prevent conflicts by creating isolated spaces for each project's dependencies. This avoids breaking changes when one project needs a different version than another. This segment uses a relatable scenario of two Python projects needing different versions of the same package (FastAPI) to highlight the problem of package version conflicts on a local machine. It clearly explains how attempting to resolve this conflict by upgrading the package globally can break one of the projects, emphasizing the need for isolated environments to manage dependencies effectively. The explanation is concise and easy to follow, making the problem and the solution (virtual environments) readily understandable.