Microsoft Virtual PC was a good test, but now it is official that on more "expensive" versions of Windows 7 [Professional and Ultimate Edition, Ed.], you will be able to run a virtual version of Windows XP.
In the past, running a virtual machine like Windows XP required at least 2GB RAM memory on your computer. These days, 2GB of memory is pretty much a standard. The buck doesn’t stop there since there is a magical ingredient that users should have in order to have a fully functional virtualization mode. That something is a processor with hardware support for virtualization.
This news is good news for AMD users, because all AMD processors from Athlon 64 and beyond have virtualization support done in hardware, and the bad news comes from Intel processors. For now it is certain that only Intel’s Nehalem architecture [Core i7, Xeon 5500] have hardware support for virtualization. When it comes to Pentium, Core 2 or Atom – you will be able to experience virtual mode, but do not expect wonders. AMD made the call to support virtualization more than 10 years ago, when K7 was taking shape – and the company is now able to reap the benefits of that design call.
If you want to know whether you can run a Virtual XP on your computer, download a little utility called SecurAble, utility that tells you can your current machine supports hardware virtualization or not.