HyperThreading was originally invented by Intel about ten years ago so that they could hide the high latencies and long pipeline in the Pentium 4. At over 20 stages it needed a ridiculous clock speed to perform.
Then Intel took a page from the AMD playbook and decided to shorten the pipeline, throw away the high GHz marketing materials and start from scratch. They've used as a basis the small - made for notebooks - Intel Core processor, and called the desktop version Core 2 Duo, and later on cca. 2007 they introduced the Core 2 Quad. Because of the short pipeline in this architecture HyperThreading would not work so Intel decided not to use it at all.
It was reintroduced in 2008 with the release of Nehalem. Intel could use it again due to the slightly longer pipelines and higher IPC count per core. This time around it could actually slightly improve performance for some limited scenarios where certain software could not take advantage of the speed of an entire core, HyperThreading would replicate the ALU resources and more small pieces of software could take advantage of the same core at the same time. This explanation is about as bare bones as it gets.
So basically HyperThreading is a mechanism meant to keep the CPU pipeline (or the pipeline of each core) filled with instructions at all times. Sometimes there is a slight speed increase, more often than not there is a slight performance loss.
When it comes to virtualization and servers in general throughput is extremely important, so the pipelines are always kept full. A bare metal hypervisor like Xen for instance will take care of its own threads and make sure that the CPU is properly partitioned between VMs and fully utilized, so HyperThreading becomes irrelevant.
The Bottom Line:
If after ten years we are still debating if HyperThreading has any tangible benefits or not then it clearly does not. It shows cute numbers in Windows synthetic benchmarks optimized for Intel, but that's about it. I'd say that the entire HyperThreading debate is like the motor oil debate: until you've been to a motor oil bottling plant, you will always think that if you spend an extra $10~$15 for a 5 quart jug of brand name motor oil your engine will run longer, however that's not the case. When they (the OEM) run out of jugs for one brand, they start bottling for another. The only difference between them is the weight (0w-20, 5w-20, 5w-30 and so on). The only time you get the real deal is when you buy it by the barrel, then you can rest assured that it's coming straight out of a refinery. Sorry for the comparison, however I'm a car guy as well