According to Parallels, this is the "...first server virtualization software to run on Intel-based Xserves...and to power VMs running on the Mac OS X platform." Similar the the Parallels Desktop product, Parallels Server lets you run virtual instances of different operating systems on top of OS X Leopard Server, including Leopard Server. The next beta of VMWare's Fusion, which like Parallels Desktop is a consumer product, will support Leopard virtualization as well, but Parallels Server is a little different and aimed at a different market.
The difference is that the hypervisor used in Parallels Server is hardware optimized and takes advantage of Intel's VT-x acceleration (which new XServe and Mac Pros have) to provide a more robust experience with better allocation of resources and memory. This makes the experience much more akin to running a completely separate machine, as opposed to running one OS on top of another.
Yesterday, we reported on Media Temple's new (xv) project, which is the first official service that will be run on Xserves running Parallels Server for Mac. The (xv) will be running multiple VMs of Leopard Server, but Parallels Server can also support Linux (Debian, SUSE, Red Hat and Ubuntu), Windows (Server 2008, Vista, XP and Server 2003 and Windows 2000) and FreeBSD 6 and 7 as guest OSes. So if you run your website off of CentOS (which is based off of Red Hat Enterprise) but your company network runs off of Leopard Server, you can do both off of one Xserve.
Make no mistake, this is an enterprise product, and as such, it is pricey. Parallels Server for Mac is $1248.75 for the software and one-year of support and maintenance and that's before you add in the cost of any software licenses you might need, but that's still a lot less expensive than another Xserve.
For enterprise users who are interested in virtualization, definitely check out the free trial.