Azure is this platform. It is a bunch of VMs but it isn't a bunch of VMs. There are roles and instance of roles (which are technically VMs).
Then there is this mysterious thing called 'fabric'. The fabric is the secret sauce, it is the thing that makes it all work.
For those of us who have been in enterprise IT - we know all about fabric. We have built it, we have managed it, we have fixed it.
This is a term that is not Azure specific by the way - you will see it appearing in more and more places - fabric is infrastructure. Azure fabric is a bit more - but you will be seeing this fabric term more frequently in the future.
In the simplest sense, fabric is infrastructure. It is the server, the hypervisor that runs on it. It is the storage and storage management. It is the network; the load balancers, the subnet, the VLANs. It is also the management layer that brings all of these things together.
It is this management layer that provides the real keys - the orchestration of events. Provisioning of storage, a VM on a hypervisor, booting that VM, configuring its firewall and networking, installing / instantiating / injecting / inserting / configuring the application, setting the virtual interfaces of the load balancers, and verifying the "health" of your application.
All of this is what the fabric does and it is really valuable, important, and useful.
If you want to geek out (in an IT Pro sort of way) and want to learn more - here are some presentations by Mark Russinovich describing the entire thing in deep detail at PCD 2010