I just noticed that apparently somebody came across this site by searching for:
the great tragedy of science — the slaying of a beautiful hypothesis by an ugly fact what did he mean
To avoid leaving the pour soul in the dark, the way I understood this quote is that in the course of scientific research, many a “beautiful” (elegant, simple, powerful) hypothesis is developed when one digs into a topic. Unfortunately, it happens quite so often that later experimental findings “rear their ugly head” by giving proof that the beautiful theory is beautiful, but false. And since we are not in the art department, truthfulness takes precedence over beauty.
In the case of the VM (admittedly not exactly a “science”), beautiful theories about its encryption get constantly slayed by statistical or systematic evidence to the contrary. Unfortunately, there is a tendency for people to twist the facts (or outrightly ignore them), rather than giving up the perceived beauty of their approach.