I’ve been a Virtual PC user for years, doing all my SharePoint development in a virtual environment. However, SharePoint 2010 only can be installed on x64 servers, and Virtual PC cannot support x64 guest systems. So, over the last week, I’ve experimented with a few options that could be utilized for SharePoint 2010 development in the future. (No, as cool as it is that we can develop SharePoint 2010 apps on a Windows 7 platform, I’m not interested in turning my host laptop into a development platform.)

Boot from VHD
With Windows 7, you can now boot up your computer from a .vhd file. This is sort of like using partitions in days of old, except you don’t need a physical partition to make it happen. By your disk living in flat file, you can still back up your environment or share it, as with Virtual PC .vhd files.
Understanding Virtual Hard Disks with Native Boot
Windows 7 – VHD Boot – Setup Guideline

Sun VirtualBox
This is one that my buddy Mike Henthorn showed me. Although I get a shiver up and down my spine, being a Microsoft person through and through, for using a Sun product, I have to admit, that Dutch part of me likes it because it’s free. (And in Sun’s defense, the product is open-source.) This provides a virtual environment that supports a x64 guest OS, and can load hard drives with a .VHD extension. It even includes snapshotting.
Download VirtualBox

VMWare Workstation
VMWare has been one of the leading virtualization software providers for a long time now. I remember hearing about them long before Virtual PC was widely adopted. Their Workstation product is a workhorse. The biggest drawback is that, well, it costs something. However, compared to what many of us developers shell out on hardware, $189 doesn’t seem like that much to shell out for a dependable product you’ll use every day.
VMWare Workstation

Please feel free to leave me a comment, letting me know which option you prefer for your SharePoint 2010 development.