Virtualization can save you time and money when used efficiently. This has made it very popular for small, medium, and large sized data center operations. Whether you have a single server or a fleet of them, virtualization has its benefits.
KVM and Xen are two virtualization options for Linux servers, both with their advantages. Xen is more mature but KVM is now included in the Linux kernel out of the box. KVM requires hardware support for its extensions, meaning that you must have a processor that supports technology like Intel VT-x or AMD-V. In other words, if you are running low-powered Atom-based servers, you will need to go with Xen.
On the other hand, Xen requires you to install a Xen-based kernel onto your server. If you are running a server leased from a service-provider, this may not even be an option if Xen is not already installed. There is, however, big commercial support for Xen, with companies like Amazon running it on their EC2 servers.
Ultimately, the decision depends largely on your circumstances. If you are running a Red Hat-based distribution, KVM is already on your system and well supported. That makes it the best option unless your hardware cannot support it. If you are running another distribution that favors Xen or are using a hosting company with commercial support for it, Xen is the best choice.