Although Windows 7 has several built-in tools to help with application compatibility and Windows XP applications should be installed directly on Windows 7. Windows XP Mode runs some older productivity applications that may not run otherwise on Windows 7.

XP Mode consists of the Virtual PC-based virtual environment and a fully licensed copy of Windows XP with Service Pack 3 (SP3). XPM does not require you to run the virtual environment as a separate Windows desktop. Instead, as you install applications inside the virtual XP environment, they are published to the host (Windows 7) OS as well. (With shortcuts placed in the Start Menu.) That way, users can run Windows XP-based applications (like IE 6) alongside Windows 7 applications under a single desktop.

Note: If you have an older version of Windows Virtual PC e.g. 2007 you will need to uninstall it first.

Install and configure XPM

1. Two installations are required, a special version of Virtual PC and the XP Mode install file itself. These can be found on Microsoft Website or at \\campus\software\iss\Publix\XPMode. There are x86 and x64 versions available. Install the MSU file first and then the Windows XP Mode installer.

2. Restart the machine.

3. Once the machine has restarted installed Windows XP Mode, click the Windows 7 Start button then select All Programs > Windows Virtual PC > Windows XP Mode to begin configuration.

4. Accept the licence agreement and click Next.

5. Specify a password for the XPMUser account. This account is the default account that is used to run Windows XP Mode and the virtual applications you install in the virtual instance of Windows XP with SP3. If you do not want to enter the password each time you start Windows XP Mode, you can store the credentials.

Important: Any application that runs on the host in the context of the user logged on to the host can access the credentials stored for Windows XP Mode.

6. At the next screen turn on Automatic Updates.

7. The next screen displays a message about drive sharing. More information is available if required. You can then start setup. This can take some time.

8. When finished you will be presented with a Windows XP Desktop logged on as XPMUser.

9. At this point you can install applications on the XP PC and they will appear in teh Windows 7 Start Menu.

10. To load the XP VM and install more applications simply select Windows XP Mode from the Start Menu.

Note: Applications installed in XPMode are published in Windows 7 under
Start Menu\Programs\Windows Virtual PC\Windows XP Mode Applications.

The contents of this folder is generated from the ‘All Users’ Start Menu folder in the XP VM located at C:\Documents and Settings\All Users\Start Menu.
For Example creating a shortcut to IE6 in the XPVM All Users start menu folder creates a shortcut in Windows 7 called ‘Internet Explorer 6 (Windows XP Mode)’

UPDATE: You may need to activate Hardware Virtualisation in the machines BIOS for this to work. If you are planning on deploying XPM then make sure the machines fully support hardware virtualisation. Thanks to Chris Letts of ECLS for pointing this out.