By now some of you might have noticed a news post on the Windows Supersite detailing an interesting new feature we can expect to find in Professional, Enterprise and Ultimate editions of Windows 7. This "Windows XP Mode" as Microsoft is calling it is fairly ingenious and is sure to be a nice new feature to business users facing the woes of migration. If you want the full technical explanation of how this works, you can find it and more at withinwindows.com.
In brief if you have ever used Virtual PC 2005, 2007, VMWare, or VirtualBox you know how this works. In essence this XP Mode is little more than a complete (and fully licensed) copy of Windows XP running within a Virtual PC 2007 (or perhaps 2009) instance. The major difference is that setup is to the most part completely autonomous with the VHD already provided along with a full XP Pro key.
Once this XP Mode has been setup, all applications installed there that create a shortcut within the "All Users" profile, will be added to your host Windows 7 installation as well. Attempting to launch the shortcut on 7 will bring up the application, or rather what looks like the application but within the VM itself sans the XP VM container. In reality the VM is still running, it’s just launching in the background and you cannot interact with it as a separate window. Instead the only window you see is the application, which is inside the invisible XP container.
All in all, this seems like a rather elegant solution, especially once you consider that this XP Mode also supports USB devices. How far that USB support goes is another question entirely, but at least Microsoft supports some if not all USB devices within XP. For anyone familiar with the popular desktop Virtual Machine clients this should be native territory, with tweaks and other pass-through options modded into the XP machine over time.
In the corporate environment, I'm not sure if this solution is too late or merely for smaller businesses. For large businesses the Microsoft Application Virtualization 4.5 server might be a better bet as it offloads the "VM" to a server where the application can be shared to countless users at the drop of a hat. This would be far more nimble and central than dealing with countless XP installations within each Windows 7 system. The requirement however is that you need to have both Server 2008 x64 and a Software Assurance agreement with Microsoft. For a smaller business, or ones looking to do it on the cheap, this might be the best method yet to ensure legacy support for old software without breaking the bank.