How to work with virtual servers?

Question is relatively simple.

When working with a match-based game, a colleague has caught me up on virtualization and that many large companies like Valve, Microsoft, Sony, etc, use virtual servers for these matches. Start a race with other players, you are connected to a virtual server along with everyone else, while the "main" server is responsible for the outer game, or the parts of the game that aren't really a game.

So cool, alright.

Is it best to have a fixed number of these servers ready? Or should they be started at runtime, being created by the server-side when they're needed? Seems to me like the obvious answer is the former, as my experience with virtual servers is that they do take some minutes to set up and all that, but I want to get your opinions, as most everyone registered on these forums has more experience with cloud and virtualization..