If you are going to run Lion Server in a virtualized environment, Parallels Server may be the solution for you. But if you are running Lion Server on a relatively small machine, another choice may be more cost effective. It comes in a standard version that runs in a Mac OS X host OS.

Parallels Server is the only server-level virtualization software for Macs. There’s a Bare Metal edition as well. Parallels Server costs significantly more than the desktop version but has performance advantages over it. For example, if your Mac has four or more processor cores, Parallels Server allows you to assign up to four virtual processor cores for each machine, whereas the desktop virtualization applications support up to two cores per virtual machine.

You can allocate up to 15 cores total for all virtual machines, more than the 12 possible cores in a server Mac. Parallels Server is also optimized for the Xserve and Mac Pro.

If your Mac doesn’t happen to have 12 cores, a significantly less expensive Mac mini version of Parallels Server supports two CPUs and 4GB RAM for each virtual machine.

Storage is another issue. A Parallels Server virtual drive can be larger than the desktop version, up to 2 terabytes (TB — 1 terabyte equals 1,024 gigabytes). Parallels Server can support up to four 2TB drive channels per virtual machine: two SCSI storage channels and two IDE channels.

Parallels Server for Mac includes a management console application that enables you to manage multiple virtual machines. You can also use the management console to create a virtual machine template that you can use in multiple virtual machines. The software automatically creates a new IP address for each virtual machine. You can use the management console on any Mac on the network.

Parallels Server 4 added a feature called Express Installation for several versions of Windows and Linux, which uses virtual machine templates to automate the creation of new virtual machines.

Another feature of Parallels Server is that it runs not as an application, but in a low-level program known as a daemon. This means that it runs in the background when the Mac boots up, even before the administrator logs in. You don’t have an application to launch.

This is different from the Bare Metal edition, which does not run on Mac OS X at all; the Mac boots directly from Parallels Server without a host OS.

Parallels Server for Mac also includes several tools for creating or importing virtual machines. A migration tool can move setups of physical Mac and Windows servers to virtual machines. You can also import a virtual machine from Parallels Desktop, VMware, and Microsoft formats.

This is not to say that you can’t use VMware Fusion or Parallels Desktop to virtualize Mac OS X Server; you absolutely can. If you’re not sure if you need the server version, download the 30-day trial version of the desktop versions and do some testing to see if they’ll meet your needs.