16GB or RAM naturally refers to the OS running DSS, which in your case, if I understand correctly, is the Linux VM.
On a personal computer:
If the host OS (Windows) has only 16GB of RAM, you cannot allocate all of it to the guest OS. Note that this configuration (guest OS, limited RAM) isn't ideal and performance might be reduced. I would try (before possible adjustments) with something like 10-12GB RAM for the virtual machine, and not running any memory-intensive program on Windows at the same time.
On a server:
The resources of a server are more important, thus you should allow 16GB or more to the VM, depending on the size of your data and on your aim to run Machine Learning models.
Note that disk I/O performance is also an important factor for good performance on a VM.