Linode is just plain xen, and domUs packed not so tightly, so it performs more or less quickly if other instances are 100% idle.)
The main assumption about virtualization is that there is no two high load domU instances running in parallel, same scenario as it was with primitive apache virtual host based hostings - we could pack them tightly, each one have 100 requests per week on average.
So, virtualization works fine for almost always idle development servers, but everything would fall apart in a I/O intense production environment.
The mantra is "I/O request should be separated and data partitioned". In case of cheap virtualized "servers" storage is the first bottleneck, because you share it with other domUs. Once they're idle, you're OK. Should one next to you running, say, a torrent tracker - you're screwed.
It doesn't matter what you're running under - Xen or just FreeBSD's jails (still love them). The problem is that a HDD could perform only one operation (read or write) at a time.)
So, your dom0 is deeply in IOwait, and your, say, mysql on domU locked all your tables, waiting for insert/update completion.
I could write a brochure, but in short - virtualization on productions is the same unnecessary complications as a Java Virtual Machine. They are nice toys, but in production everything is better without them.)