Another virtual machine product that has been making a lot of noise lately is Xen, the open source project from Xensource. Xen uses a different approach to virtualization than Virtual Server, called Paravirtualization. In this type of virtualization, the guest OS has to be modified to work with a software interface to the Virtual Machine Monitor, instead of thinking it is running on the hardware. The thing is that this actually enables better performance of the Guest OS, as it aware that is running on a virtual machine environment. Xen also supports running unmodified OSes, but for that it is mandatory to have hardware virtualization (VT-x on Intel or SVM on AMD CPUs).
The next releases of Windows Virtualization are implementing a similar approach. It will still be pure virtualization, but the Guest OS will also be enlightened. What this means is that the Guest OS will be aware that it is running on a VM, so it will be able to increase the performance using a modified kernel. The best part about all this is that Microsoft and Xensource are actually working together to make sure that the technology included with Windows Virtualization will be compatible with the technology used in Xen. So, at the end, we, the customers, win. 