Single-image systems like Linux-VServer (or FreeBSD jails) are more efficient than fully virtualized systems like Xen (or VMWare); however, they're not as secure (the userland-kernel interface is far wider than a kernel-virtualizer interface, so there's far more potential for escape-from-jail bugs) and the fact that there are more shared resources increases the potential for a busy website to cause other sites on the same physical hardware to slow down.

Personally, I wouldn't hesitate about using a jailed system for testing purposes, but I'd want a fully virtualized instance (or real hardware) for a production site.