I think that Xen and VMWare still can have IO performance issues (and this is often how things are after the install). Paravirtualised drivers do of course help with this as will further virtualisation features such as IOMMUs. You also have the fact that Xen hard partitions memory.

A containers based approach such as Virutozzo which only has one kernel means that you should get near to or even native IO performance and the memory management can be more flexible giving extra memory to VMs that need it (which of course could be detrimental on very oversubscribed boxes)

Also note that openvz.org hosts the open souce variant of Virtuozzo. The number of VPS providers out there that support openvz or full fat virtuozzo seems much larger than those using Xen at present - so it is well used.

Or rather than pay $2,500 per dual cpu (for a supported product), consider Solaris 10 -- Zones have been around for a couple of years, included at no extra cost, and integrated into the base O/S.

Or free beer&speech via opensolaris.org

Plus ZFS -- throw another filesystem or three at each Zone, resource control via cpu sets and/or fair-share CPU scheduler, mem & network resource mgmt, full visibility from global zone...and RH or Sol8 "brands" as needed.

With O/S virtualisation there's one copy of filesystem buffers/metadata, one copy of all the shared binaries, shared libc text, etc, etc; much more memory efficient -- and harware virtualisation doesn't have to reverse-engineer and second-guess what the guest O/S thinks it's trying to do.

VMware, Xen or LDoms can still be used "under" the O/S for cases where more than one O/S type or version are required.