Windows 7 has a strong compatibility story with Windows Vista, and many applications that currently run on Windows XP-based or Windows Vista-based PCs should just run natively on Windows 7 – allowing you to take advantage of better performance, better management and better security built into Windows 7.
In most cases, Microsoft recommend running applications natively in Windows 7. Windows XP Mode provides what they like to call that “last mile” compatibility technology for those cases when a Windows XP application isn’t compatible with Windows 7. Users can run and launch Windows XP productivity applications in Windows XP Mode directly from a Windows 7 desktop.
More info and download link here: http://www.microsoft.com/windows/virtual-pc/default.aspx
Here is a demo video (found on YouTube) of it in action:
…note this version refers to the Beta version, but as of today the Release Candidate version is available using the link provided earlier in the post.
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