I've wondered how "WAN optimization" magic works, and I just came across a page to explain it in (a little) more detail than marketing. I hadn't heard of it until a couple years ago, when some Cisco people mentioned that their WAASrouters embed KVM for virtualization.
Why would they do that? Because if your branch office uses an Active Directory server in your centralized data center, and your WAN link dies, work at the branch office ceases. From what I understand, Cisco's WAAS routers run an Active Directory server inside a virtual machine on the router itself, to mitigate that problem. A little googling reveals that similar approaches may be taken by their competition, 3Com and Riverbed.
In general, I expect we'll see much more virtualization in this area in the future. For example, today Cisco's Application Extension Platform (AXP) products are physical x86 cards you stick into a router to run server workloads. It would be plain silly not to take advantage of the well-known consolidation benefits of virtualization to accomplish the same thing. (That's pure speculation, but as I said... silly.)
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