We have about 50 SQL Servers on VMs, mostly production, but some are development. We do not generally put highly loaded servers on VMs, but they are great for "one off" special purpose servers.

I would say that as long as the VM environment is well managed, that there is no problem. In general, our VM servers have no more downtime than "real" servers.

It saves a lot of management effort and money to be able to do physical to virtual migrations for older servers, rather than keeping them on hardware maintenance contracts or replacing them with new hardware. Being able to move from older, failing hardware without having to reinstall OS, SQL,and application software is a huge time saver, especially when it is older software that is not well supported.