SuperSite for Windows takes a look at the updated version of Windows XP Mode, which is available for MSDN/TechNet subscribers. Here's a taster:

Windows Virtual PC will be delivered to Windows 7 Professional, Enterprise, and Ultimate customers via a web download that includes two executables. The first, Windows6.1-KB958559-x86.msu (32-bit) or Windows6.1-KB958559-x64.msu (64-bit), depending on your platform, updates Windows 7 and actually provides the expected Start Menu entry points. And then you reboot.

First, the integration components now support XP with SP3, Vista with SP1, and Windows 7, so you're free to install these other OSes in VMs if you'd like. As per previous Virtual PC versions, you get seamless mouse movement between the host and VMs, can access a combined host/VM clipboard, access physical drives and printers on the host from within VMs, and, in a new twist, some USB devices. (This was a notable missing feature in Virtual PC.) Microsoft says that USB-based printers, storage devices and smart card readers are now automatically shared with virtual machines. You can also redirect other USB devices to VMs via the new USB menu in the VM window; each attached USB device on the host is listed.