Data center servers are notoriously under-utilized. Most servers do not come close to peak operating capacity on any given day. In fact, according to Gartner’s white paper on Data Center Power and Cooling Scenario Options for the World Ahead, April 2007 during a 24 hour period less than 10% of the typical x86 /x64 server computing capacity is used.
Server virtualization tackles this issue by abstracting the application / operating system sets from the physical systems providing for more than one set to be run on each physical system. As current systems are underutilized and difficult to reallocate based on demand, virtualization lets the IT team place more work quickly and appropriately on less physical servers – optimizing usage and minimizing the amount of physical assets to manage and support.
Tom Pisello throws some light into the ROI when virtualizing. If you don't know who tom is , just check out the software which VMware uses for TCO calculations.