This paper investigates what it entails to provide I/O service differentiation and performance isolation for virtual machines on individual multicore nodes in cloud platforms. Sharing I/O between VMs is fundamentally different from sharing I/O between processes because guest VM operating systems use adaptive resource management mechanisms like TCP congestion avoidance, disk I/O schedulers, etc. The problem is that these mechanisms are generally sensitive to the magnitude and rate of change of service latencies, where failing to address these latency concerns while designing a service differentiation framework for I/O results in undue performance degradation and hence, insufficient isolation between VMs. This problem is addressed by the notion of Differential Virtual Time (DVT), which can provide service differentiation with performance isolation for VM guest OS resource management mechanisms. DVT is realized within a proportional share I/O scheduling framework for the Xen hypervi...