Wikipedia has a good article on Solaris Containers Sun has this article on virtualization, which has this diagram:
My first experience with virtualization was with VMWare on my home desktop. I had used to install 2 operating systems on base OS of Windows. VMWare is the oldest player (first VMWare product was introduced in 1999) and the company which started the virtualization market. We have come a long way since then with Oracle also producing its own product Oracle VM.
Virtualization is a good technology for sharing of resources. However my experience has not been so good with this on Production environments. I remember an Oracle Database which had Production, Development and Test instances as VMWare VMs on a single physical box. It was on Red HatEnterprise Linux 2.1. Due to bugs in RHEL 2.1, the box had to be physically rebooted almost every day. Bad blocks would appear in Oracle Database, and if you rebooted the physical server and did an fsck, they would go away. To get out of this mess, a dedicated server without VMs was commissioned for the Production instance, on which RHEL4 was used.
I am hoping that Sun's OS virtualization configuration is more robust and will not have such issues. However, all virtualization has an Achile's heel. It is after all a single physical server. Any problem in the hardware of that box, could impact all the VMs on the box. So virtualization is a single point of failure which should be paired with other technologies to build a real HA environment.
A new licensing agreement between Sun and Oracle recognizes Solaris 10 capped Containers as hard partitions. Metalink Note 317257.1 describes best practices for running Oracle Database in Solaris 10 containers.
I have logged an SR with Oracle to find out their support stand as far as E-Business Suite and virtualization are concerned.