Re: How?
Well, Linux (Oracle for years, Ubuntu since last year) has had the facilities to patch the running kernel without rebooting the system. It also has support for hotplugging even CPUs.
Windows because of it's filesystem semantics requires reboots for most updates, even the ones that do not touch the kernel. (An EXE/DLL being executed is locked, thus even an user level app needs a reboot to update these.)
OTOH, I tend to agree, to idea is to create a virtual setup in a cloud, where one system going down, is not really an issue.