Massive LVM snapshots use lots of space on your backup destination. Virtual machine volume images are (often) mostly empty, especially if more disk has been allocated than the VM is currently using. In such a case, it makes sense only to store nonzero blocks of data.
UPDATE [updated Sun Jan 2 19:49:50 PST 2011]
This is an updated (more efficient/faster) patch to support sparse files
I’ve also written a patch that aligns rdiff-blocksizes for files >1GB on “Globals.blocksize” boundaries (currently 1024*128). This works much better for RAID devices than the “square-root” approach for smaller files, as reads are aligned on 128k boundaries instead of 16-byte-aligned boundaries. See the patch for details.