Talk about mis-application; I know this is off topic but the over use of virtual machines everywhere is starting to trip me out. Why in the world would you buy a brand new machine to run your production web site and then put VMWare on it and run one machine instance?? I could understand if you buy a big powerful machine and carve it into multiple smaller machines all serving separate and unique purposes - that is a common and good use case for it but people aren't just doing that, they are taking it overboard.
Using virtualization has a lot of benefits even when you have just one virtual instance. In your example, the real overkill is VMware, not virtualization per se!
Instead, kernel-based virtualization such as BSD Jails, Linux-VServer or OpenVZ is the right approach. This type of virtualization comes without any performance penalties! And by using hard links, you can avoid wasting disk space, too.
The benefits are better hardware abstraction, i.e. easier movement to other machines, improved backup possibilities, etc. In fact, the BSD manual recommends the usage of jails for years, if not decades.
I'd say that this kind of virtualization is still underused, while inappropriate kinds of virtualization start to become overused. Maybe this is due to "successful" marketing of VMware. They promote the right techniques, but the wrong technology.
It allows for easy live migrations for maintenance, and allows us to build VMs that are happily 100% oblivious of the underlying hardware. While most of our servers are split into multiple VMs, we consistently deploy new hardware with VMs even if they're intended for a single function simply because of consistency and ease of maintenance.
Virtualization is good in e.g. cloud scenarios where the usage is spread out to different machines through out the day. Rather than have 10 machines averaging 5% utilization at all times you can have 1 machine with e.g. 60% utilization all the time. A win.
Sadly, pointy-haired bosses have started putting developers on VMs which is exactly the opposite use case: all people loading their machines at roughly the same time (e.g. I've heard people claim that in Java 1/3rd of time is spent compiling. If you have more then 3 devs....). A fail.
