no, there is something called
virtual private servers. Lots of hosts use those. This is what he kinda wanted to do.
many people think you have to have a full host OS to do it, when you don't have to. You can use a bare metal hypervisor such as esx/esxi from vmware or using other products like xen or open vz.
hosting companies have been doing this for more then a decade.
this is also used in cloud computing to allow the vm to scale up or down dynamically and also to provide fault tolerance and load balancing. it's very cool and used not just to run windows apps on linux or linux apps on osx. This has uses beyond what most can realize.
technologies like vmware esxi, vcloud, vsphere, etc tie it all together with your servers, load balancers, and storage area networks.
I love this tech and I would love to see even more advancements in cloud computing and virtualization!
there are also several
types of virtualization as well please refer to this wiki for info.
some of those are designed to reduce overhead and also emulate full hardware or emulate a core set of hardware.
datacenters use
hardware virtualization and they use bare metal hypervisors like esxi,xen,kvm,etc....