Nowadays LXC unprivileged can handle docker daemon smoothly. It is best option for memory constrained hosts.
LXC Pros:
light for host
no VM overhead (we are using it as Gitlab runners with docker executors)
device pass through (possible to run i.e. Jellyfin or Frigate with Coral accelerator or pass GPU to offload decoding). Setup is a bit complicated but works.
LXC Cons:
NFS server / client only in privileged
slow backup - Proxmox treats FS access in generic way to provide compatibility on every type of storage. So under the hood rsync is called which needs to traverse LXC filesystem. This was the main reason why we moved our Nextcloud server to VM.
NOTE: not tested - but sentence above can be outdated because PBS introduces backup fleecing for LXC.
VM Pros:
!!! live migration (and HA)
“problematic” software works
faster disk access in some scenarios comparing to LXC
PCI / USB pass through
SPICE USB pass through from webbrowser (use Windows VM to run Windows only software to create USB bootable stick which is inserted to my local Linux based PC)
fast, incremental backup using QEMU dirty-map
VM Cons:
virtualisation overhead
host RAM assigned