With Windows 7, however, Redmond has provided a solution to the problem: Windows XP Mode. Windows XP Mode uses virtualization technology to let applications running on a virtualized copy of Windows XP show up in the Windows 7 Start menu and on the Windows 7 desktop.
Windows XP Mode is a downloadable add-on for Windows 7 Professional, Ultimate, and Enterprise. It has two parts: the virtualization software itself, and a disk image containing a pre-installed, activated, licensed copy of Windows XP Professional with Service Pack 3 preinstalled, complete with the glorious Internet Explorer 6.
The virtualization software is the latest iteration of Virtual PC. Although you wouldn't know it from the download page, this is available for any version of Windows 7 aside from Starter. You wouldn't know it, because selecting a version of Windows other than those previously listed removes the option to download Virtual PC. It shouldn't, though; it should only remove the option to download the Windows XP Mode image.
In a break from the past, the new version requires hardware virtualization support—Intel's VT or AMD's AMD-V. Microsoft's current server virtualization platform, Hyper-V, has the same requirement, but for Virtual PC this is a new demand, and one that's perhaps a little surprising. For virtualizing 32-bit guest OSes, far and away the most common usage scenario, the benefits of hardware virtualization are something between small and non-existent; though hardware virtualization is potentially a little faster, the difference in practice isn't perceptib