Linux virtualization serves the same purpose as virtualization on any platform. You can run multiple servers on one computer.
For example, let's say I want to use Linux and Apache to host my website, but I want to use Microsoft Exchange for e-mail. On the same computer I can have a virtual machine of Linux with Apache, and a separate virtual machine of Windows Server running Exchange. Also, depending on the software, sometimes certain services don't play nice together when they are housed on the same system, or it's just a good idea to have them separated. The host OS is really up to you, but virtualization allows you to get more out of each machine, thereby reducing cost and overhead. Instead of multiple server blades, all using a portion of their capacity, and all soaking up electricity, you could have one server with a ton of RAM and a multi-core processor, soaking up much less electricity, and serving the same functions (Backup servers are a must, single points of failure are bad). Also, virtual machines can be "saved". For example you can set up your server, configure it, update it, and get it operational, and then perform a "save state" on that virtual server. You can then, in the event of a crash, restore that saved state, minimizing the impact the failure has on the rest of your organization, and, unless the failure affected the host os, without affecting the availability of your other services.