Like "virtually" everything else, virtualization will have an impact on the application server environment. Yes, app servers are so common and have been around for so long that they are practically commodities now, but there are some real opportunities to lower costs and shrink the footprint using distributed platforms capable of running numerous apps using various operating systems.
All of the major vendors -- BEA, IBM, Oracle and the like -- are pursuing this strategy, if only to add some spark, and significant cash flow, to what has been a rather lackluster product segment for several years.
There's also a move afoot to bring appliances into the game. The idea is to eliminate the negatives from both online apps (backup and ownership issues) and local service (server management and maintenance). A virtual appliance lets you launch any number of apps and OSs from within a single hardware setup, truly offering what you want when you want it at minimal cost. VMware, Parallels and XenSource are just a few of the firms developing systems along these lines.
And while we're at it, kudos to VMware for finally offering Mac users a virtualization alternative. Not that there was anything seriously wrong with the Parallels solution, but it's nice to have choices.