Virtualization is the big thing, everybody is doing it - just read the in-flight magazine to see why you should be virtualizing your data center... While it is true that Virtually everyone in the fortune 500 has begun to virtualize their data center, it is also true that most servers are still not virtualized.
i.e. The data center landscape is still mostly an opportunity. The software is mature, there are multiple viable solutions, but there are still many questions about how "best" to proceed.
As an enterprise engineer working with enterprise customers, I am inevitably asked where the sweet spot is. The reality is, there isn't one. Or "It Depends". In general larger ( 4 socket servers) provide an edge in efficiency as there are more shared components - board, memory, power supplies, etc. Large servers can also provide more head room if most of your VMs are low utilization, but any of them can spike way up. The launch of Intel's six core Xeon 7400 series based servers ( and their record breaking virtualization performance) have added to the interest - is it time to go big?
What does it depend on?
How big are your VMs? Machines today are quite powerful. We have seen a 10X growth in compute capacity in just the last 6 years. The application that filled 37% of your 2003 vintage server won't even make a dent in a modern Xeon based server. i.e. Most VMs are much smaller than your server 2 socket or 4 socket. There are still tasks - like decision support that scale as big as your machine will go, but with average enterprise utilization down around 12% ( on old hardware) most physical machines fit tidily inside a VM.
How spiky are your VMs ( in resource demand - compute, memory, network)? By doing some resource profiling, you can understand where your servers fit best.
How many VMs do you want on each PM(physical machine)? You can put more on 4 socket hardware ( efficiency) but have greater redundancy on a bunch of 2 socket hardware ( depth).
Fortunately you do not have to solve this linear programming problem before you start. In reality the tools are making it easier you solve. Using your favorite VMM manager (choosing this is another discussion). With Intel's VT Flex Migration Technology you can pool together 1, 2, 4 socket current and future generation Xeon platforms and move the workloads ( automatically, or manually) to optimize your resource utilization.