Because you dont move the data. You just move the server (in that I mean the servers memory of the vMotion network). It literally takes a couple of clicks and seconds, no downtime, no bother.
When updating the software you have the benefit of snapshots- in that you can protect against problems by snapshotting the current server state (again in mere seconds) before performing the upgrade. You can even clone the server, upgrade the clone and leave the live server running. So development and testing can be done on exact copies of the server, not ones that depend on perfect documentation.
Of course you can never totally free yourself from some restrictions- but there is no denying that VMWare makes things a lot less painful.
Of course the OS lets you do that, but as we all know not all apps coexist happily, and with the way VMWare allocates resources dynamically we have yet to have had any server run slower than its physical equivilent. In fact our SQL servers run far faster because of the number of spindles we are able to allocate using HP EVA SAN technology. In fact its quite staggering to realise how little our old physical servers were doing- replacing 24 individual servers with 3 Dual Quad-Core Xeons blew me away. I couldnt quite believe how well they performed- especially now we have our dev environment running on there, so thats 33 servers running.
Plus think of the electricity savings in replacing that much kit with a SAN, 3 hosts and 1 physical host to handle backups! One other neat thing VSphere does is allow us to move all the servers onto 2 of the hosts, shutting down the 3rd server as it is idle and backups run- then the 3rd server is fired up again as soon as the extra processing power is required. Clever clever stuff, but also something that saves our company money- especially as the servers idle at weekends too. Thats about 150-170 days per year that the servers are running at 2/3s power consumption.
VMWare really is gobsmacking- but to appreciate it you HAVE to throw away all the old conventions and be prepared to think afresh. I may sound like a bit of an evangelist but I wasnt prepared for just how good it works, and how much easier it makes my job.