I have started to do research for personal interest into the history of virtualization. and What I have discovered would shock most anyone using virtualization technology today. The who idea of virtualization is older then I’m. Real world applications have just become available in recent years. But the foundation for server virtualization dates back to the early 1970’s. There is an article from 1974 which states:

Virtual machine systems have been implemented on a
limited number of third generation computer systems, e.g.
CP-67 on the IBM 360/67. From previous empirical
studies, it is known that certain third generation computer
systems, e.g. the DEC PDP-10, cannot support a virtual
machine system. In this paper, model of a thirdgeneration-
like computer system is developed. Formal
techniques are used to derive precise sufficient conditions
to test whether such an architecture can support virtual
machines.

That is introduction to “Formal Requirements for Virtualizable Third Generation Architectures”
Gerald J. Popek
University of California, Los Angeles
and
Robert P. Goldberg
Honeywell Information Systems and
Harvard University

Much of article very dated referring to PDP-10 hardware which many of us have hardly heard of let alone used. But what I find most interesting is that many of the issues stated in this 30 year old article have yet to be resolved. It wasn’t until Intel’s newest chipset which have a built in hypervisor to support more native virtualization. Within a few years as multicore servers become the norm much of the portion of hardware nodes software may drift into the actual server cpu core.
Links:

http://en.wikipedia.org/wiki/Popek_and_Goldberg_virtualization_requirements

http://portal.acm.org/citation.cfm?doid=361011.361073