Microsoft has repeatedly cited a “major announcement” that would coincide with the introduction of the Windows 7 release candidate, and it appears that we now know what that big announcement is. Microsoft plans to kill any and all concerns over Windows XP application compatability by offering a free Windows XP VM for owners of Windows 7 Professional, Business and Enterprise editions.
Unlike normal VMs which present a second desktop, the new VM known as “XPM” can offer virtualized applications without the appearance of a host environment. The icons for any software installed to XPM are simultaneously published inside Windows 7 as though it were a native application. As a wild example of the possibilities, you can see this screenshot below which demonstrates Office 2003 running on XP and Office 2007 running on Windows 7:
XP Mode consists of the Virtual PC-based virtual environment and a fully licensed copy of Windows XP with Service Pack 3 (SP3). It will be made available, for free, to users of Windows 7 Professional, Enterprise, and Ultimate editions via a download from the Microsoft web site. (That is, it will not be included in the box with Windows 7, but is considered an out-of-band update, like Windows Live Essentials.) XPM works much like today’s Virtual PC products, but with one important exception: As with the enterprise-based MED-V (Microsoft Enterprise Desktop Virtualization) product, XPM does not require you to run the virtual environment as a separate Windows desktop.
By introducing Windows XP application support to the new generation of Windows 7-only applications, Windows 7’s application compatability profile now exceeds that of any prior Microsoft OS.