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To run linux guests I can highly recommend OpenVZ. It's a container system - you run only the host kernel which is modified to implement isolation between containers and each other, and the host. Processes in the containers run as processes on the host, with a container-specific root directory.
The upshot of all this is that overhead is almost zero; each guest runs at almost native speed. There are various other benefits too, such as:
There are some caveats though:
Overall OpenVZ is very stable and functional. I haven't had any kernel crashes related to OpenVZ. I would like them to support newer kernels - specifically 2.6.23 and above, since there are features in 2.6.23 that I want to use. But the patch is quite extensive and so I can't really blame them for picking a version and sticking with it for a long time. OpenVZ patch developers have contributed many security and stability fixes back to Linus. One day, much of OpenVZ will be integrated into the mainline kernel. Already 2.6.24 supports PID namespaces (in which process IDs are unique to each guest, not the host) and further OpenVZ functionality will move into the mainline kernel over time.