A previously NDA’d feature of Windows 7 has finally gone public; basically, Win7 comes with a virtualization-based “XP mode” that creates a virtual machine to host any apps that can’t run in a post-XP environment.
The real bonus here is that it allows Microsoft, like Apple before them, to make a break with backward compatibility. OS X was a quantum leap over System 9 precisely because they made no real effort to allow backward compatibility outside a “compatibility box” that was the next best thing to virtualization (since virtualization wasn’t really an option 9 years ago).
Microsoft has, so far, not made the same kind of break with the past, and that’s hamstrung the evolution of the platform. If they do this right, they’ll be able to make the same kind of leap with 7 or whatever comes after 7 that Apple made in 2000.
This is a good thing for everyone; I’m not a huge Windows fan, but I want Microsoft in the race in the same way I want the GOP in the race. Competition is good for everybody.