Tableau Server can be deployed on both physical hardware as well as virtual hardware (VM).
Running on VM platforms hosted by a 3rd party offers the flexibility of not having to manage your own IT infrastructure and datacenter management chores. By outsourcing these server hosting tasks to someone else, you're free to focus on your core BI efforts instead - which is why more and more companies are taking this approach.
Currently there's no formal support from Tableau for running on virtual instances on the current major cloud infrastructure platforms like Amazon AWS, Windows Azure, RackSpace, etc. - should we change that?