Virtualization is gaining momentum as a key component in many server consolidation scenarios. While it sounds like a great technology it's not necessarily the best solution. I found this quote over on the virtualize now blog:

"Virtualization does not, in itself, reduce the complexity of IT systems. In fact, quite the opposite - virtualization may temporarily increase complexity. Virtualization does provide standardization of the infrastructure, by abstracting the differences in hardware platforms and creating a homogeneous environment for the operating system. Operational costs for managing and Auditing virtual machines are therefore likely to depend on the level of automation that can be introduced into a VM-based data center. By deploying automatic provisioning and auditing tools, IT executives can take advantage of the standardization provided by the VM and reduce operational costs."