If you need a free virtualization solution, I strongly recommend ESXi. Even the free, limited version works very well in small environments.
However, if you’re thinking of going the open source route, KVM is an up and comer in the market that is 100% free and 100% open source. It’s actually built right in to the Linux Kernel and comes with RHEL, CentOS, Ubuntu and many more Linux distributions.
Right now, KVM requires Linux knowledge to setup and configure, but Red Hat and others are starting to change that as KVM becomes a more viable alternative to VMWare. Red Hat is currently developing an enterprise product based on KVM to compete with VMWare and Hyper-V.
One of the Product Marketers for the “Enterprise Virtualization” department at Red Hat, Chuck Dubuque, wrote a great post about how KVM is integrated into the Linux Kernel and how that provides a more stable, better performing and all-around tighter experience for admins and end-users compared to some other Linux solutions like Xen.
He included this great slide in his post:
If you’re thinking about an open-source solution for your test lab or even in your data center, grab a copy of CentOS or Fedora and play with KVM. You’ll notice right away how tightly integrated it is into your installation.