KVM is probably more widely used than you suspect..
Gartner can get cold hard numbers from VMware and extrapolate that over a sample set to get the number of instances in your average hypervisor cluster. The "cold hard numbers" it might get from RH aren't representative of KVM's installed base (in fact, many organisations don't use RHEL but instead one of its many open source derivatives), and then will use it differently to how they'd use VMware. But then again, maybe they're right....
Virtualisation is often a solution to a problem that many Linux shops don't have... partitioning hardware because they have software that doesn't scale. Virtualisation is often used only for R&D and QA environments, where performance is of less importance and speed and flexibility of provisioning is key. It may not ever touch a production box.
If you can deploy well designed software that scales across CPUs and can run alongside other software on raw hardware, then you've got no need for virtualisation.
In my organisation, we do use KVM extensively in production for more than one reason (we have enough legacy software that doesn't scale and/or won't guarantee to play nicely with other apps; we also have multiple independant operations teams which we want to slowly merge; and we have problematic network and DC management (a more fundamental and definitely the most frustrating problem) and we can reduce the pain with virtualisation). It's my firm belief that we should be minimising the use of virtualisation purely for performance reasons. As an aside, I'm keeping a very close eye on LXC and OpenVZ (as they port to cgroups) for lightweight virtualisation alternatives. My kingdom for Solaris Containers!
Having software that can scale and share the same instance (or not) still leaves the unanswered question.. what's your platform? Virtualisation doesn't give you a platform.. it gives you infrastructure.. How do you install and configure your OS correctly. By hand, with a checklist? Network-install with post-install scripts? Puppet/CfEngine? Hosting services? How do you deploy new releases of software? And if rollback is required? Multi-Datacenter? How do you abstract away the differences? How do you get your datasets from A to B reliably and fast? Will your applications survive a DC failure?
While virtualisation is an important and liberating technology, Platform was, is, and will always be the true differentiator... and almost all non-trivial solutions are developed in-house, and most are never shared.