The nice thing about Linux is that it can be configured to a very small footprint, with only the capabilities required for the application. This makes the embedded OS light weight and non-intrusive. With the popularity of Linux, there is a wealth of talent able to add value on such an embedded Linux base. And there is a broad range of features that can be configured to gain access to a lot of devices and capabilities.
The not so nice thing about Linux is that it it is a pile of tools and components, and not a product. The Linux community provides good support, but it is the vendors like MontaVista that select the right components, integrate and test them, and make them available with support. This is the same story as in the data center, where Novell/SuSE, Red Hat, and Ubuntu provide packaged Linux distributions that can be easily deployed, and are supported.
Developing embedded electronics is a very cost conscious enterprise. Adding weeks or months to the development cycle to learn how to configure and build a Linux kernel and modules for your chosen hardware platform can have a huge impact on whether the exercise is economically viable. Being able to choose MontaVista Linux as the base lets developers concentrate on adding value they can get paid for.
A quick Google search for embedded Linux yields lots of hits for companies and projects, though some of the projects haven't been worked on in years. And, Google is promoting Android and promising Chrome sometime next year. So I expect there will be a number of places to get Linux for an embedded application. And, while not spending excessive development time reinventing an embedded OS is a good thing, it doesn't mean you can take the OS platform for granted. In many embedded applications, the OS needs are modest, so it should be easy to get your mind around the concepts and procedures needed to support the OS. Having that expertise in-house is valuable when the product needs support or when, inevitably, some one wants the product enhanced.
What will be missed is MontaVista's focus on carrier grade Linux, and APIs for high availability and next generation security. A Google search for carrier grade Linux yields far fewer relevant hits. One, Wind River, is already captive to a chip vendor (Intel).