Two Different Ways of Running Virtual Machines on Windows 7
Approach #1: Virtual PC for Windows 7
The Windows Virtual PC for Windows 7 works just like older versions of Virtual PC. However, the user interface is slightly different. To create a new VPC, click “Windows Virtual PC” from All Programs. This opens the virtual machines folder. While in the folder, click “Create virtual machine”. You can follow instructions and complete the remaining steps.
You can download and install Windows XP Mode and Windows Virtual PC, currently in RC, here.
Approach #2: Dual Boot to VHD
You can find Scott Hanselman’s blog that provides step by step instructions on how to dual boot to VHD. This is a supported and recommended approach.
For more detail, check out this blog.