Surely saying that virtualization is not about improving security is an overstatement... The idea of virtualization for improving security is understanding that there *will* be security bugs in any sufficiently complex system, so limiting the damage those bugs can cause is an effective security measure (one of many, per layered defense doctrine). This is one of the concepts behind, say, Qubes-OS. As a general user, I employ a weaker form of this; I do the bulk of my web browsing on my home system from a virtual machine with a minimal OS from a read-only filesystem that I reset before and after transactions with sensitive information; surely this improves *my* security, though it naturally can't make the apps or services themselves any more secure. While it should still be possible to attack the rest of the system in this kind of setup, the attack surface is reduced, and many kinds of common security flaws are circumvented. Qubes takes this much further, with some of the key system components (e.g. networking) in their own VM contexts. The Qubes developers also argue that a smaller common base (Xen) can also be audited more thoroughly than an entire kernel, which I'm guessing is an advantage over containers; I haven't seen an analysis by the Qubes folks specifically addressing the containers approach.
Are there better approaches? Quite possibly; but it's certainly easy to implement a VM approach, and can be a major component of a total security policy.