rHype is an IBM project that was recently published under an Open Source license (GPL). This project is essentially a virtualization machine for Linux. Comparable to IBM's LPARs for mainframes, but naturally designed for much smaller machines.
It could be the ideal complement to Xen - another GPL project for virtualization based on Linux. Taken together, both could become an interesting open source alternative to VMWare.
Virtualized servers are very interesting for many purposes, as usually only a virtual machine is lost in case of problems and the migration of services on virtual machines is easier than moving around real hardware. Better to have a few large boxes with virtualized servers on them than many smaller boxes with dedicated systems.
Virtualized servers in real use can be done with User Mode Linux today. In this case, a Linux kernel is operated as its own process under the actual hardware kernel via special APIs in user mode instead of directly on the hardware. Each virtualized machine has its own user mode kernel, its own memory, and its own virtual disk areas.