"No-one is claiming that virtualization makes a system magically completely secure, but do people actually believe that it makes it less secure? (Compared to, running the same software on the same hardware using a single OS). I don't think so."
However, common virtualized platforms such as EC2 encourage you to run your whole server setup in an environment where a (possibly malicious) neighbour could be running arbitrary x86 code in an instance on the same physical machine. This is not an attack vector that is remotely possible in the traditional, non-virtualized setup.
They aren't encouraging you, it is being demanded (by you, by everybody). This is how cheap, reliable, redundant computing is offered, and it will always be cheaper than paying for and maintaining entire physical machines.
However, common virtualized platforms such as EC2 encourage you to run your whole server setup in an environment where a (possibly malicious) neighbour could be running arbitrary x86 code in an instance on the same physical machine. This is not an attack vector that is remotely possible in the traditional, non-virtualized setup.