Once Windows 7 ships, Windows 7 Professional, Enterprise, and Ultimate edition users will be able to download a free Windows XP Mode upgrade from Microsoft, WinSuperSite's Paul Thurrott reports. What Thurrott calls XP Mode will enable these versions of Windows 7 to be almost perfectly compatible with Windows XP applications. Essentially, Windows 7 will have "Windows XP inside" when XP Mode is installed.
What is XP Mode? Officially known as Virtual Windows XP, it combines a hardware-accelerated host virtualizer based on Virtual PC with a fully licensed copy of Windows XP Professional SP3 which the user must supply [updated 4-29-09]. While, at first glance, this might sound like little more than a more convenient replacement for downloading a copy of Virtual PC 2007 and scrounging up a Windows XP Pro disc and license from a dead PC, there's a lot more to Virtual Windows XP.
As the WinSuperSite screenshow reveals, Virtual Windows XP will be able to share your system's USB drives, and when you install apps to Virtual Windows XP, your Windows 7 menu will automatically be updated with shortcuts, enabling you to run Windows XP programs in separate virtualized windows on your desktop. Although the virtualizer used by Virtual Windows XP is a host-based virtualizer, these features put it miles ahead in usability compared to Virtual PC 2007 plus Windows XP. And, because Virtual Windows XP's virtualizer requires hardware virtualization support, it won't bog down your system the way an unaccelerated virtualization host will do.
Are there any downsides? For a couple of potential gotchas, and for your chance to sound off, join us after the jump.