Exactly. We were sold "process isolation" and "virtual memory" back with the 386 chip and Windows NT. But the actual effective security was squandered for the sake of convenience and compatibility. OSes didn't really want to share the hardware in any meaningful way.
The current demand for virtualization is, to a significant degree, an attempt by admins to get control of their own hardware back from Microsoft. Putting MS back in charge of the lowest layer hypervisor seems like it could sort of defeat the purpose. Or maybe they'll play nice this time?
But the actual effective security was squandered for the sake of convenience and compatibility. OSes didn't really want to share the hardware in any meaningful way.
Computers are designed to do more than one thing, but traditionally many servers were purchased per-role. Mission critical apps would only run on one version of Windows, or apps might not play nice with others or with OS upgrades.
It turns out that one of the apps people really need to run multiple instances of is Windows itself. This is largely Microsoft's fault for bundling every app including the kitchen sink in the OS platform itself. As a condition of using their clean little high-performance kernel, you had to accept a web browser and home-user-friendly userspace.
Little surprise that people are kicking the whole package off of Ring-0 and substituting something like vmware for their $five-figure server hardware.
It's that super-isolation that actually allows multiple apps/roles/data categories to finally share the same hardware.
We should be virtualizing the software, not the machines. Oh wait, we already are: JVM, CLR, Python RT, good-old-fashioned processes etc...
Virtualization is just snake oil. I don't see a real use for it TBH and I work at a place that drinks the VMware kool aid. All it does is cost money, use up resources and excuse incompetant administrators from having to plan properly up front.