As of now, Virtual Server 2005 R2 is available as a free download from Microsoft with no strings attached. Anyone...
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running Windows XP Professional Service Pack 2 or any edition of Windows Server 2003 can download and run this latest version of Virtual Server 2005. (But as a side note, Microsoft recommends against using XP as the host operating system, although it's suitable for testing.)
Not long ago, Microsoft acquired the Connectix product Virtual PC and rechristened it Microsoft Virtual PC. Virtual PC lets you run any x86-based operating system in Windows as if it were a program itself, which lets you create machines within machines. As such, Virtual PC has proven to be an enormously useful tool for system builders, software testers, administrators and everyone in between. I myself use it regularly when I want to test software products in a controlled environment without loading them into my system at large.
Not long after purchasing Virtual PC from Connectix, Microsoft developed a version of the product called Virtual Server, designed specifically for virtualization of server operating systems.
The differences between Virtual Server and Virtual PC are fairly important. For one, Virtual Server has a COM API that allows it to be scripted or driven by other programs, making it possible to automate a great many functions that might normally have to be completed manually. Virtual servers can also be managed through Microsoft Operations Manager and Microsoft Systems Manager as if they were real-world machines. Virtual Server 2005 R2 also supports host clustering, so that multiple virtual machines on the same host can be run in a clustered configuration.
Aside from virtualizing new systems, Virtual Server is meant to help consolidate legacy systems. An existing legacy system running NT 4.0, for instance, could be consolidated into a virtual server and run on newer hardware while its functions were being phased out. Likewise, a new server (Windows or otherwise) could be set up in a virtual machine, given a shakedown and then later migrated to "real" hardware if needed.
Microsoft's probably acquired Virtual PC in order to compete with VMware, a similar product that in some ways is slightly more robust. VMware has better control over virtualized hardware, such as USB devices. Similarly Microsoft probably released Virtual Server 2005 R2 as a free product to counter VMware's release of the VMware player, a freeware version of VMware that can run virtual machines but not create them. There's a high degree of interoperability, as well--VMware Player can run both Virtual PC and Virtual Server machines natively.
I suspect another reason behind releasing Virtual Server 2005 as a free product is that in order to run multiple copies of Windows Server, one needs to have legitimate licenses for each copy in the first place. Since Linux's licensing is entirely different, Microsoft loses little by allowing it to run on Virtual Server. In fact, Microsoft has Linux guest support software available for Virtual Server 2005 R2 as a free download. This makes it possible to turn a single Windows machine into both a Windows and a Linux server for very little cost, which is something people interested in migrating in either direction could be interested in.