I'm hearing more and more questions about data deduplication and virtualization. And, it's not just server virtualization, another area is desktop virtualization. With server virtualization, you have lots of virtual machine images out there and they have the same operating system. For example, Windows Server 2003 might be installed multiple times. I'm backing up multiple copies of something that I essentially only need one copy of. Whether it's an operating system file, a patch, an application, a device driver, whatever it may be, I only really need one copy. So, the benefit of data deduplication can be enormous.
In physical environments, next-generation backup has been somewhat slow and marginalized; maybe solving niche problems on the fringe of the data center. This is most likely due to cost. Implementing server virtualization really requires a refresh of the data center, so it's an opportunity to do so.
Check out the entire Virtual server backup FAQ