To be fair, this is only true if the storage back end is appropriately configured.

You will take an I/O hit when instead of a single physical machine asking for a set of sequential blocks off the disks, you have 20 virtual machines asking for seemingly random blocks off the disks.

Replace disks with storage array if you'd like.. but the fact remains: more VM's will mean more storage contention. If you have the funds to have dedicated arrays per VM, hats off to you. Most people never do this, and I/O suffers a penalty. Virtualization has is price, and even that being said, I think it's worth it for most people.