I’m no VMWare guy like these guys , but as I understand it ESXi is the skinny little hypervisor (clocking in at 32mb) that lets you run virtual guest operating systems. So you could buy yourself a server with a few cores, lots of RAM, some disk (hey maybe even use iSCSI for storage ) and run lots of virtual servers within that environment.
How can they be releasing something so good for free? Well they’ve done it before, releasing the successor to VMWare GSX Server called VMWare Server for free a few years ago. This was awesome for IT pros who rely on virtualisation to run labs when they are doing training. And now with ESXi we’ll be able to do it even easier (VMWare Server still requires you to install an OS like Windows first, whereas ESXi is the OS – so to speak).
Aside from having done this before, VMWare says the bulk of their revenues come from sales of their Virtual Infrastructure suite (the bits that let you run clusters of ESX servers, do failover of guests between hosts, resource management etc). So basically they can afford to give away the basic bits (run virtual guests on a single host) for free.