The advances in VM technology for both client and server operating systems is obviously a great thing. It saves money, time and makes life much easier when you can just copy an image to a different machine, make backup copies of an image and go back to an old image in a very small amount of time. It's great too for having software testing environments.
One significant downside to this technology is going to be the amount of legacy software that will stick around. By software, I mean operating systems and applications. Upgrading or moving to a different OS or app is always a hassle. However, one common opportunity when switching to a newer OS or app makes sense is when replacing old hardware. Before VMs entered the scene, you might traditionally buy a new workstation or server every 4 years, for example. A new machine means re-installing the OS and applications. What a perfect opportunity to start off the new machine by installing the latest OS and applications.
With VM technology, when a physical machine needs to be replaced, if the OS on it is already a VM, you just copy that VM to the new hardware. Even if the old system isn't a VM, no problem. There's tools available to create a VM from a physical instance of an OS. Once the old physical instance of an OS is a VM, you just copy that VM over to the new hardware. So you end up with a brand new machine, but the old OS and old applications are still running on that machine.
For software companies, this means their customers may demand they support older versions of their software for a longer period. When building new versions of software, it may also be necessary to include support for older operating systems based on the number of existing or potential customers who are still running an old OS.
A client of mine just recently needed to replace their 8 year old server. It's a Windows 2000 terminal server that several employees work out of. I've convinced some of the employees to start using Firefox, but others are still stuck on IE6. The client ended up converting the physical Win2K server to a virtual server and copied that over to the new hardware. Ack! There's that growing movement in the community to persuade people to get off IE6. I think the statistics show the percentage of IE6 users out there is still in the 15% - 25% range. That's much too high a demographic to desert and not support when building a website. Unfortunately, IE7/IE8 isn't available for Windows 2000. For this particular client, I just need to convince everyone there to start using Firefox. Maybe I can just hide the IE6 icon on their desktops :)
IE6 is a classic example of software you want everyone to get off of, and bury as deep as possible. It's definitely not the only software out there that should be moved away from as newer versions of subpar software are released. This increase in legacy software still being used out there is one of the few downsides to this overall great virtualization technology.