hwvirt is what most people think of when you say "virtualization", so they try to compartmentalize things at that level. i don't see why Xen/KVM/whatever is fundamentally more secure than something like Illumos Zones or FreeBSD Jails. Linux, unfortunately, doesn't think that way, but that doesn't mean it can't.
i think osvirt is a more efficient abstraction, but the industry clearly has other ideas.