This piece at www.cio.com covers the benefits of virtualization to developers fairly well, which doesn’t always get discussed in the focus on server virtualization.
The one thing I don’t think they covered is an infrequent but substantial: migrating to a new development computer is a lot easier. In the past when I upgraded my main development computer, it took days to get all the software installed and then all the configuration for each project set-up properly. That’s a lot of time of lost productivity. When I moved from my previous computer to my Mac Pro, it took me just a few hours. We installed the operating system and a few key pieces of software like VMware Workstation. Then I just copied my virtual machines to my new hard drive, and I was good to go.