Cloud infrastructure providers like Amazon Web Service sell virtual machines. EC2 revenue is expected to surpass $1B in revenue this year. That's a lot of VMs.
It's not hard to see why there is such demand. You get the ability to scale up or down, guaranteed computational resources, security isolation and API access for provisioning it all, without any of the overhead of managing physical servers.
But, you are also paying for lot of increasingly avoidable overhead in the form of running a full-blown operating system image for each virtual machine. This approach has become an unnecessarily heavyweight solution to the underlying question of how to best run applications in the cloud.