A. The new second generation of Intel's Core i3, i5, and i7 processors, known as Sandy Bridge, have several new processor instructions, including AVX, which help floating point intensive applications. See this Intel page for more info.

Because the processor and additional instructions were released after Windows Server 2008 R2, the hypervisor doesn't know how to interact with the new processor instructions. Rather than risk corruption to the guest OS, the VMs won't start.

To resolve this problem, either install SP1 for Windows Server 2008 R2 or install this hotfix.