"Thousands of cycles" is definitely not true on modern CPUs. SYSENTER/SYSEXIT takes 150 cycles on my Xeon X3460.

Given the kind of "cloud"-backed startups most of HN are working on, I think the more practical measurement would be the overhead of a ring 0/3 separation in a VM, plus hypercalls, plus a ring 0/3 separation in the hypervisor (for paravirtualized syscalls); averaged against a ring 0/3 separation in a VM, plus SR-IOV virtualization (for HVM-backed syscalls.)

Yeah, this doesn't apply for context-switches that happen because of plain old pre-emption, but it does happen if the context-switch is because e.g. a network packet wants to arrive at another process in your VM than the one that's currently running.

I would imagine that there's a reason bare-metal IaaS providers have a business model. :)

My knowledge of current timings are admittedly a little out of date since my microkernel days are behind me. Even the 150 cycles another poster suggested is still a significant cost over a userland context switch.