The analogy isn't perfect because the Federal Reserve "creates" more money than is actually printed, so the dollar is really a "virtual" currency as well. But the point stands that the total amount of _commitments_ made in dollars exceeds the amount of dollars that "exist" by any central measure.
The physical (virtual?) Bitcoin example would be: if you have an account with a Bitcoin bank and you make a transfer to someone else who's using the same Bitcoin bank, they don't have to generate a Bitcoin transaction to honor that transaction.
The virtue of Bitcoin is that it allows anyone to perform transactions in a way that only banks can do with dollars, but this is not the only way to perform transactions with Bitcoins any more than it is with dollars.