1. A system for verifying virtual machine (VM) data files, comprising: a hypervisor configured to receive a selection of an image level backup file to verify; a virtual storage connected to the hypervisor; a data conversion engine configured to perform on-demand decompression, de-deduplication, decryption, and extraction to translate selected portions of the selected image level backup file so as to represent (publish) contents of selected portions of the selected image level backup to the hypervisor in the native (source) format without fully extracting contents of the image level backup; at least one test VM, wherein the hypervisor is configured to launch the at least one test VM; a changes storage used to store test VM virtual disk data changes inflicted by running and verifying the VM, wherein the changes storage is implemented using virtual storage logic; and an operating system (OS)/application verification module, wherein the OS/application module is configured to perform, using backup testing parameters, automated testing of functionality of an OS or an application.