The upcoming release 4.1 of vSphere will introduce a new memory over-commitment technique called Memory Compression which VMware claims to greatly improve virtual machines performance under heavy load.
There may be further innovation in this area coming in the near future: in January 2010 a number of Chinese researchers presented a new technique called Dynamic Memory Paravirtualization (DMP) for virtual infrastructures:
In dynamic paravirtualization, VMM (virtual machine monitor) dynamically monitors and replaces the hot instructions, which cause most VM exits. It is transparent to the guest OS such that the legacy OSes can benefit from this optimization. Our study focuses on reducing the overhead of memory virtualization—dynamic memory paravirtualization (DMP). We implant a new memory management mechanism in VMM such that all user-mode page faults can be handled by the guest OS directly without VM exits. We implement a prototype of dynamic memory paravirtulization based on a version of KVM using Intel VT. Our experimental results show that our technique essentially eliminates the overhead of VM exits caused by page faults. Dynamic memory paravirtualization can achieve the effectiveness of paravirtualization without changing the source code of guest OS.
So far a prototype has been tested with KVM build 54 on a machine powered by Intel VT-x.
The 12-pages paper is available here.