This is Sun's awful name for their server virtualization capability in Solaris 10. This lets you set up up to 4,000 virtual Solaris machines which use a common kernel (thus meaning one point for kernel patches,etc) but having their own IP address, memory space, file area, host name, and root password. There's nothing particularly new about the idea, though usually such services are provided by an overlord program like VmWare. Microsoft has their own Microsoft Virtual Server 2005 (announced in 2004 - Microsoft doesn't want anyone thinking this is some moldy old thing left over from last year!), and I'm sure there are others.
The buzz-word is "server consolidation", which expresses the idea that modern hardware is too damn powerful. Why then have folks been running so many different servers? Well, because different app software doesn't always play well with other app software. Running on virtual servers takes advantage of one piece of hardware but isolates apps from each other. Of course it also means that if you do have a hardware failure, you lose a lot of stuff at once.
There are other advantages, though. Virtual servers can be backed up easily from the mother OS, can be frozen, moved about, restarted etc. Resources like hard drives are also virtualized, making changes to "hardware" easier. It's easy to deploy test platforms, and of course the mother OS can enforce security beyond what a guest OS does.
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