Over the past year, as I've learned more about Microsoft's enterprise-oriented virtualization solutions--especially Microsoft Desktop Optimization Pack (MDOP) tools such as App-V (Application Virtualization) and, now, MED-V (Microsoft Enterprise Desktop Virtualization)--I've become convinced that the technologies they employ could form the basis of the future of Microsoft's legacy application compatibility efforts.

After all, why bother tying down new Windows versions with legacy deadwood when you can seamlessly and effortlessly run older Windows applications inside of a hidden virtualized environment?

To users, these applications simply help them get their job done. They run side-by-side with modern, native Windows applications that are installed locally. To the administrator, these applications are highly manageable and can be deployed just where needed. Clearly, these tools are a hint, a pointer, of what's to come.

That future became clearer last week when my "Windows 7 Secrets" co-author Rafael Rivera and I revealed that Microsoft is indeed building App-V- and MED-V-based technologies into Windows 7. 

Dubbed Windows XP Mode (it was originally called Virtual Windows XP), this feature will ship separately from the core OS for antitrust reasons and will be made available for free to customers of Windows 7 Professional, Enterprise, and Ultimate editions.

If you're familiar with MED-V, you can think of XP Mode as MED-V Lite. But where MED-V is aimed at large companies and requires a volume license agreement with Microsoft, XP Mode is aimed at small and medium businesses that skipped over Windows Vista because that OS wasn't compatible with the legacy or custom applications they're still running on Windows XP. (There are other reasons why customers have skipped over Vista, of course, and Microsoft addresses those concerns—such as performance--elsewhere in Windows 7.)

XP Mode couldn't be simpler. It consists of Windows Virtual PC 7.0, a new version of Microsoft's client-based virtualization product line, and a fully licensed installation of Windows XP SP 3. (You can also install other OSes into the Windows Virtual PC 7.0 environment if you'd like.)

As with today's versions of Virtual PC, you're free to load up the XP desktop in a window and run applications inside of the virtual environment. But XP Mode goes a step further by using MED-V technologies to allow installed applications inside of the virtualized XP to appear in the host OS, alongside native Windows 7 applications.

Gaining access to applications in this fashion is likewise simple. Newly installed applications will simply be published directly into the Windows 7 Start Menu, where they can be accessed like any other applications.

Those that don't for some reason, or built-in applications such as Internet Explorer 6.0, can be made to run under Windows 7 simply by copying a shortcut to that application in the All Users Start Menu under virtualized XP. Once you do so, shortcuts to those applications appear under Windows 7 too.

XP Mode is exciting on many levels. As with MED-V, it erases the complexity of managing two desktops, each with its own set of applications. Instead, virtualized XP applications simply run side-by-side with natively installed applications, access the Windows 7 file system and printers seamlessly, and otherwise work exactly like Windows 7 applications. This means that users can simply work and not worry about what's going on under the covers.

Unlike with other virtualization solutions, though, XP Mode also includes a fully-functional copy of XP. That's quite a value and a major benefit of choosing one of the higher-end Windows 7 product editions.

Finally, XP Mode brings enterprise-class functionality down to unmanaged desktops and those businesses that are not yet involved in Microsoft's volume licensing programs. This move will dramatically increase the exposure this technology gets and bring it to a much wider market.

This is exactly what I asked for the first time I saw MED-V in action. It's wonderful technology, I said, but why aren't you bringing it to the world? Now they are.

Looking forward, it's easy to imagine two things happening. First, Microsoft would move to replace the Virtual PC-era technology in XP Mode with something more sophisticated, along the lines of its Hyper-V server technology. Second, by removing the responsibility of legacy application compatibility from the core OS, Microsoft could strip deadwood technology out of future Windows versions more quickly and create a system that would be, by default, even smaller, lighter, and more secure than Windows 7 is today. I can't wait.

If you're interested in testing XP Mode, it's not included in the recent Release Candidate version of Windows 7, but I'm told that a beta version should become available in the days ahead. Stay tuned.

Secret No More: Revealing Windows XP Mode for Windows 7