VMWare is rumored to be planning on releasing one of their Virtualization products for free. The company is best known for VMWare Workstation, which allows you to install and concurrently run multiple Operating Systems on the same host machine. Woekstation is primarily aimed at endusers for thier desktop machines. The company has two other server based products GSX Server and ESX Server. GSX Server allows a datacenter to dynamically provision and run muliple server installations on one box, but still requires a host operating system to run on. THis is the product that VMWare are expected to give away. ESX Server is their high end product which operates at a lower level and does not require a host OS.
The biggest threat to VMWare is most likely the Open Source offering from XenSource, whose software is soon to be bundled with Linux Enterprise Server packages from RedHat and Suse Linux.