KVM is a type-2 hypervisor built into the Linux kernel as a module and will ship with any Linux distribution moving forward as no work is required for the Linux distributions to add KVM. Having a virtualization platform built-in to the Linux kernel will be valuable to many customers looking for virtualization within a Linux based infrastructure; however these customers will lose the flexibility to run a bare-metal hypervisor, configure the hypervisor independent of the host operating system, and provide machine level security as a guest can bring down the operating system on KVM.
Xen, on the other hand is a type-1 hypervisor built independent of any operating system and is a complete separate layer from the operating system and hardware and is seen by the community and customers as an Infrastructure Virtualization Platform to build their solutions upon. In fact, the Xen.org community is not in the business of building a complete solution, but rather a platform for companies and users to leverage for their virtualization and cloud solutions. In fact, the Xen hypervisor is found in many unique solutions today from standard server virtualization to cloud providers to grid computing platforms to networking devices, etc.
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