So, in our scenario, if we limit VMs to use only a certain amount of clock cycles, what happens to the rest of the available clock cycles in ton that particular core? Can other VMs who are set to schedule CPU time able to use the remaining cycles or are they simply wasted and ALL VMs have to wait for their turn to schedule for the amount of time they are limited?
No those cycles are not watsed - they will be used by other VMs -