I was reading through the 'BlueVM refugee' thread and there is quite a bit of conversation about "those VM's are oversold... you'll get terrible service". Then I got to thinking, I do the exact same thing. Oversubscription is part of the economics of virtual machines. If it weren't for oversubscription, each hardware node would have precisely one VM and that would be it.
The OP in that thread was looking for a $4/mo server with 4 cores and 2 GB of ram. So I set about figuring out how I might be able to do that at scale and decided it couldn't be done (well... I wasn't going to do it). The hardware would be absolutely obsolete by the time it was paid back - either that or I would have to overload the nodes in a way I'm not comfortable.
But that raises the question - how much is too much? If you're paying $4/mo for a VM with 4 cores and 2GB of ram, are customers really expecting dedicated-like responsiveness and performance? How do you quantify 'too much'? VMware best practices have some guidelines but that doesn't really apply to every hypervisor and virtualization technology. I'm just curious for thoughts on the topic.