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Significance of CPU type?

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A few days ago I had to change the CPU type of a VM to 'host' in order to give it access to the CPU's AES-NI engine. Now I see that pve-2.3 will change the default CPU type to 'KVM64'.

Stupid question: I understand that some OS uses hardware detection to lock in licenses (Windows I think), and there I see the purpose of providing a "stable" CPU even if the host changes. But are there other reasons why one would "define" the CPU type? What is the significance of the CPU types?

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