Windows 7 with integrated Windows XP
Windows 7 will provide an integrated virtualization with Windows XP to ensure compatibility with Windows XP applications.
Lacking downward compatibility has always been an important issue with every new Microsoft operating system. While users got off rather lightly with smaller updates from Windows 98 to ME or Windows 2000 to XP bigger updates such as from Windows 9x to XP or from Windows XP to Windows Vista partially caused severe problems.
Windows 7 is supposed to change that. By using a very similar technology the compatibility to Windows Vista is already given. But Microsoft also takes Windows XP users into consideration. Since several applications did not run under Windows Vista and required an alternative OS or a Windows XP version in a virtualized environment the latter solution has now been integrated in Windows 7. Microsoft uses the virtualization software Virtual PC which is available for free.
Virtual PC 7 has directly been integrated in Windows 7 now. In conjunction with an especially adjusted Windows XP version "VHD” a seamless integration with the interface is possible: Windows XP applications can be started from the start menu as usual and are visible in the task bar - only the design of the related window reveals its XP origin. Very convenient: USB devices with XP drivers only can directly be used in the Windows XP mode.
Downer for gamers:
Like with past Virtual PC versions no DirectX or OpenGL acceleration is planned. In case those interfaces would work error-free at all the CPU had to do all the computation and thus running of games or other demanding applications would be impossible.
A CPU with virtualization technology (AMD-V or Intel's VT) and a valid Windows XP license is needed for using the "XP mode”. The latter will be integrated in Windows 7 on from the "Pro” version. According to the official Microsoft Windows 7 blog Virtual PC 7 and the VHD version of Windows will then be available for download.