So I would love to RTFA to make sure about this, but their high-performance web servers running on FreeBSD jails are down, so I can't...
But here's what I do know. FreeBSD hasn't been a supported OS on ESX Server until vSphere came out less than two weeks ago. That means that either:
A) They were running on the Hosted VMware Server product, whose performance is NOT that impressive (it is a Hosted Virtualization product, not a true Hypervisor)
or B) They were running the unsupported OS on ESX Server, which means there was no VMware Tools available. The drivers included in the Tools package vastly improve things like storage and network performance, which means no wonder their performance stunk.
But moreover, Jails (and other OS-virtualization schemes) are different tools entirely - comparing them to VMware is an apples-to-oranges comparison. Parallels Virtuozzo would be a much more apt comparison.
OS-Virtualization has some performance advantages, for sure. But do you want to run Windows and Linux on the same physical server? Sorry, no luck there, you're virtualizing the OS, not virtual machines. Do you want some of the features like live migration, high availability, and now features like Fault Tolerance? Those don't exist yet. I'm sure they will one day, but today they don't, or at least not with the same level of support that VMware has (or Citrix, Oracle or MS).
If you're a company that's trying to do web hosting, or run lots of very very similar systems that do the same, performance-centric task, then yes! OS Virtualization is for you! If you're like 95% of datacenters out there that have mixed workloads, mixed OS versions, and require deep features that are provided from a real system-level virtualization platform, use those.
Disclosure: I work for a VMware and Microsoft reseller, but I also run Parallels Virtuozzo in our lab, where it does an excellent job of OS-Virtualization on Itanium for multiple SQL servers...