Xen's bigges strength really is in the colocation business. With VX-enabled machines, it is capable of running instrumented OS's (Linux, Free/NetBSD) at almost native speeds, and non-instrumented OS's (Windows, Solaris) with a couple-% hit. It's that flexibility that leads to colo as the market where Xen shines.
People seem to be thinking that Xen is only for sharing a colo machine with somebody else. But it could just as well be used for one organization to isolate each major application to a single virtual server, i.e. email server, general web server, wiki server, hot web app server, Asterisk server, etc. This way, when one of the applications justifies its own server, migration is somewhat simpler because it is not entangled with other applications. -- Michael Dillon